the taxable year for services performed in the 
United States, 
‘‘(B) retirement distributions which are in-
cludible in gross income for such taxable year, 
plus 
‘‘(C) amounts received under any law of 
the United States or of any State which is in 
the nature of unemployment compensation, over 
‘‘(2) the standard deduction. 
‘‘(c) STANDARD DEDUCTION.—For purposes of this 
part— 
‘‘(1) IN GENERAL.—The term ‘standard deduc-
tion’ means the sum of— 
‘‘(A) the basic standard deduction, plus 
‘‘(B) the additional standard deduction. 
‘‘(2) BASIC STANDARD DEDUCTION.—For pur-
poses of paragraph (1), the basic standard deduction 
is— 
‘‘(A) $25,580 in the case of— 
‘‘(i) a joint return, or 
‘‘(ii) a surviving spouse (as defined in 
section 2(a)), 
‘‘(B) $16,330 in the case of a head of 
household (as defined in section 2(b)), and
‘‘(C) $12,790 in the case of an indi-
vidual— 
‘‘(i) who is not married and who is 
not a surviving spouse or head of house-
hold, or 
‘‘(ii) who is a married individual filing 
a separate return. 
‘‘(3) ADDITIONAL STANDARD DEDUCTION.—For 
purposes of paragraph (1), the additional standard 
deduction is $5,510 for each dependent (as defined 
in section 152) who is described in section 151(c)(1) 
for the taxable year and who is not required to file 
a return for such taxable year. 
‘‘(d) RETIREMENT DISTRIBUTIONS.—For purposes 
of this section, the term ‘retirement distribution’ means 
any distribution from— 
‘‘(1) a plan described in section 401(a) which 
includes a trust exempt from tax under section 
501(a), 
‘‘(2) an annuity plan described in section 
403(a), 
‘‘(3) an annuity contract described in section 
403(b), 
‘‘(4) an individual retirement account described 
in section 408(a),
‘‘(5) an individual retirement annuity described 
in section 408(b), 
‘‘(6) an eligible deferred compensation plan (as 
defined in section 457), 
‘‘(7) a governmental plan (as defined in section 
414(d)), or 
‘‘(8) a trust described in section 501(c)(18). 
Such term includes any plan, contract, account, annuity, 
or trust which, at any time, has been determined by the 
Secretary to be such a plan, contract, account, annuity, 
or trust. 
‘‘(e) INCOME OF CERTAIN CHILDREN.—For purposes 
of this part— 
‘‘(1) an individual’s taxable income shall include 
the taxable income of each dependent child of such 
individual who has not attained age 14 as of the 
close of such taxable year, and 
‘‘(2) such dependent child shall have no liability 
for tax imposed by this section with respect to such 
income and shall not be required to file a return for 
such taxable year. 
‘‘(f) INFLATION ADJUSTMENT.— 
‘‘(1) IN GENERAL.—In the case of any taxable 
year beginning in a calendar year after 2006, each 
dollar amount contained in subsection (c) shall be
increased by an amount determined by the Secretary 
to be equal to— 
‘‘(A) such dollar amount, multiplied by 
‘‘(B) the cost-of-living adjustment for such 
calendar year. 
‘‘(2) COST-OF-LIVING ADJUSTMENT.—For pur-
poses of paragraph (1), the cost-of-living adjustment 
for any calendar year is the percentage (if any) by 
which— 
‘‘(A) the CPI for the preceding calendar 
year, exceeds 
‘‘(B) the CPI for the calendar year 2005. 
‘‘(3) CPI FOR ANY CALENDAR YEAR.—For pur-
poses of paragraph (2), the CPI for any calendar 
year is the average of the Consumer Price Index as 
of the close of the 12-month period ending on Au-
gust 31 of such calendar year. 
‘‘(4) CONSUMER PRICE INDEX.—For purposes 
of paragraph (3), the term ‘Consumer Price Index’ 
means the last Consumer Price Index for all-urban 
consumers published by the Department of Labor. 
For purposes of the preceding sentence, the revision 
of the Consumer Price Index which is most con-
sistent with the Consumer Price Index for calendar 
year 1986 shall be used.