How much money can you make without having to pay taxes, on the surface, seems like a pretty straightforward question. But reality is, the answer isn't nearly as clear-cut as it appears it should be. Because the IRS uses several factors to determine the minimum income to pay taxes based on criteria such as your age, filing status and the source or type of income, it can get a little difficult for taxpayers to keep up. And just for good measure to keep U.S. taxpayers on their toes, the IRS throws a yearly curve-ball and typically changes the minimum income you need to earn before you are required to file federal income taxes.
The good news is, the IRS is also very transparent about the changes to these filing requirements, and has a number of helpful interactive tax assistant tools on its website to assist taxpayers in navigating those often turbulent tax-time waters.
There is not one set minimum income to owe taxes that applies to all taxpayers across the board. In order to determine whether or not taxes must be filed, you have to check the IRS minimum filing requirements, which are generally adjusted annually.
Nondependent Minimum Income To Owe Taxes
Each year before taxpayers are required to file taxes, the IRS releases new annual figures that determine what the filing thresholds will be for the upcoming tax year. These thresholds are typically adjusted annually for inflation, and how much income you earn is not the only factor used to determine whether or not you have to file taxes. A taxpayer's dependency status, age as well as filing and employment statuses are taken into account when figuring out federal income tax filing requirements. It is worth noting, however, if you are a self-employed or independent contractor, the filing threshold before you are required to file for any given tax year is only $400. This means, if you earn more than $400 in self-employed income during the year, you must file taxes regardless of your age or filing and dependency status.
Below you will find the earned income minimum filing requirements for taxpayers who cannot be claimed as dependents for tax year 2017:
Single Filing Status
- 65 and under – $10,400
- 65 and older – $11,950
Married Filing Jointly Status
- Both spouses under 65 – $20,800
- One spouse 65 and older – $22,050
- Both spouses 65 years and older – $23,300
Married Filing Separately Status
- Any age – $4,050
Head of Household Status
- 65 and under – $13,400
- 65 and older – $14,950
Qualifying Widow/er Status
- 65 and under – $16,750
- 65 and over – $18,000
If you have earned more income than listed above for your filing status and age, then you are required to report this income to the IRS and file a federal income tax return. Sometimes, your personal situation is such that you might notice yourself falling under more than one filing status. In this case, the IRS instructs taxpayers to file under the status that provides them with the most tax advantages. Even though determining your filing status may seem pretty cut and dry, numerous taxpayers mistakenly file under the wrong status on their tax returns each year, which means an amended return must be filed.
If you're unsure which filing status is most appropriate for your individual situation, you can avail yourself to the various publications and interactive tax assistant tools that can be found on the IRS website. The agency's website is a treasure trove of information that assists you in not only determining your correct filing status, but also helps you to figure out if you are required to even file taxes at all. The tax assistant tools can also let you know whether or not you can expect a refund or if you qualify for certain refundable tax credits.
Dependent Minimum Income Filing Requirements
Income is income, and the IRS does not discriminate when it comes to who has to file taxes. Even if you are under the age of 18, or can be claimed as a dependent on someone else's tax return, the IRS likely wants its portion of any income you receive. Qualifying dependent children or relatives still have to file taxes on both their earned and unearned income (such as interest or dividends from investments) they receive during the year as long as they meet certain minimum income thresholds.
For IRS purposes, qualifying children have to be under the age of 19 (or age 24 in the case of full-time students) and responsible for less than half of their own care and support. For example, if your 22 year-old son is a full-time college student, and you provide more than half of his support and upkeep, then you may claim him as a dependent. But claiming him as a dependent doesn't mean that he is not responsible for filing his own federal tax return. Even if you are able to claim your son as a dependent on your tax returns, he still has to file his own taxes if he exceeded the following minimum thresholds.
If you are a dependent, here are the 2017 minimum earned income requirements you'll use to determine if you must file taxes or not:
- Under 65 years of age and not blind – more than $6,350 65 years of age and older or blind – more than $7,900 Blind and 65 years of age or older – more than $9,450
- Under 65 years of age and not blind – more than $6,350 65 years of age and older or blind – more than $7,600 Blind and 65 years of age or older – more than $8,850
Claiming Tax Exempt Status
Whenever you begin a job with a new employer, he will likely give you an IRS Form W-4, Employee's Withholding Allowance Certificate, to fill out. This form lets your employer know how much in taxes to withhold from each of your paychecks, every pay period, to cover federal income as well as Social Security and Medicare taxes. On your W-4, you are permitted an allowance for yourself, your spouse and each of your qualifying children or dependents. You can claim as many allowances as you are legally permitted to, however, the more allowances you claim, the less your employer will withhold for tax purposes. Claiming too many could result in a huge tax bill to Uncle Sam, however, claiming tax exempt status means you will not have any federal income taxes withheld from your paycheck.
What? No federal taxes withheld, is that even possible? The answer is, actually, yes, it's possible. Although this sounds ideal, the IRS only allows for taxpayers to claim a tax exempt status in certain situations. To claim exemption from federal taxes, you must have received a refund for the previous year and had no federal tax obligation. You also have to anticipate your situation will be the same for the current tax year. This means, in order to claim tax exempt status, you can't have any federal income tax obligations – not even a dollar – or you are ineligible for this status. It is worth noting that while you may be tax exempt, you are still responsible for Social Security and Medicare taxes as well as any state or local taxes that may be levied. To find out if you are eligible to claim this status, read IRS Publication 505, Tax Withholding and Estimated Tax, for more information.
To claim your tax exemption, you only need to fill out lines 1, 2, 3, 4 and 7 of the W-4 form. There is a deadline to file your W-4 declaring your tax exempt eligibility. For example, Feb. 15, 2018 was the deadline to declare yourself tax exempt for the 2017 tax year. Sometimes situations change and you may make more in a year than you previously thought you would when you first declared tax exemption. If this happens, you might owe the IRS money, as you had no taxes withheld from your pay for the year. However, if you qualify for the Earned Income Tax Credit or Child Tax Credit, these refundable credits could reduce your tax obligation to zero or even result in a refund. Consulting with a certified tax professional for assistance may be a good idea if you want to avoid the surprise of a huge tax burden come tax time.
Social Security Benefits and Taxes
You may be shocked to find out that Social Security benefits are indeed taxable in some states. While 37 states including California and Michigan do not tax these benefits, several states still do. You can also expect to be taxed on the federal level in addition to – and regardless of – whatever taxes your state may levy on you. According to the Social Security Administration's website, typically this only happens when you have “substantial income in addition to your benefits (such as wages, self-employment, interest, dividends and other taxable income that must be reported on your tax return).”
If this is the case, then you could have up to 85 percent of your Social Security benefits taxed depending upon your combined income for the year. To make sure you are up to speed regarding whether or not your Social Security benefits are subject to tax, you may visit both the IRS and the SSA websites for the most up-to-date information.
Filing When You Aren't Required
After you've checked the minimum filing thresholds for a particular tax year, and have determined based on your age and filing status that you are not required to file, it may still be a good idea for you to do so anyway. If you had any taxes withheld from your paycheck for the year, but are not required to file taxes, then you may be cheating yourself out of a refund. The IRS will definitely let you know if you owe money, but isn't in the habit of alerting you of funds owed to you – so don't expect the agency to come beating down your door to hand over a refund check. In order to receive a refund or to take advantage of any tax credits for which you are eligible, you must file IRS Form 1040, U.S. Individual Income Tax Return. Keep in mind that the IRS is rolling out a new, consolidated 1040 Form that will replace the 1040, 1040A and 1040 EZ for the 2019 tax season.
Even if you had no taxes withheld from your paycheck, it could still be a good idea for you to file. You could qualify for a refundable tax credit that could also result in a refund you would not otherwise receive if you don't file. Refundable tax credits either help provide incentives to taxpayers who take part in various government programs or ease the tax burdens of low- to moderate-income workers. Tax credits work by directly reducing the amount of taxes you owe. After your tax obligation is reduced to zero, if it is a refundable tax credit, then the IRS will refund you the difference between what the credit was worth and the remainder left after your tax obligation is satisfied.
Two popular refundable tax credits are the CTC and the EITC. The CTC is a partially refundable credit up to $1,400. To ensure you meet the qualifications for the various refundable tax credits available, pay a visit to the IRS website. Tax credits each have their own eligibility requirements, are subject to phase-out limitations and are sometimes discontinued completely for certain years, so it doesn't hurt to make sure you have the most current understanding available.
- IRS: Do I Need to File a Tax Return?
- Forbes: Do You Need To File A Tax Return In 2018?
- TaxAct: Dependent Income - Filing Requirements
- Patriot Software: What Does it Mean When an Employee Is Tax Exempt?
- IRS: Publication 505, Tax Withholding and Estimated Tax
- Social Security Administration: Income Taxes And Your Social Security Benefit
- IRS: Use the EITC Assistant
- AARP: Do You Need to File a Tax Return?
Tara Thomas is a Los Angeles-based writer and avid world traveler. Her articles appear in various online publications, including Sapling, PocketSense, Zacks, Livestrong, Modern Mom and SF Gate. Thomas has a Bachelor of Science in marine biology from California State University, Long Beach and spent 10 years as a mortgage consultant.