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Do I Have to File Taxes and How Much Do I Need to Make?

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269.4K

How do you feel when you think about taxes? Confused? Intimidated? Overwhelmed by the number of rules to follow and forms to complete? What if you could avoid filing a return entirely?

No, we’re not talking about dubious tax shelters or evading the IRS. Some people truly don’t need to file a tax return at all. Depending on your age, income, filing status, and whether you are a dependent, you might be one of them. Here’s how to determine if you are.

Tax Income Filing Limits

For 2018 tax returns, these are the filing thresholds for people who are not claimed as a dependent on someone else’s return. If you earned less than the designated amount for your age and filing status, you are not required to file a return.

Filing StatusAge as of 12/31/18Minimum Income Requirement
SingleUnder 65$12,000
65 or older or blind$13,600
Married filing jointlyUnder 65 (both spouses)$24,000
65 or older or blind (one spouse)$25,300
65 or older or blind (both spouses)$26,600
Married filing separatelyAny age$5
Head of householdUnder 65$18,000
65 or older or blind$19,600
Qualifying widow(er)Under 65$24,000
65 or older or blind$25,300

A note about turning 65: If you turned 65 on January 1, 2019, the IRS considers you to be 65 for 2018.

As you can see, the first determining factor is your filing status. The income requirements differ considerably depending on whether you file as single, head of household, married filing jointly or separately, or as a qualifying widow or widower.

Age 65 is a key factor because taxpayers age 65 or older receive an additional amount added to their standard deduction, which increases the minimum income requirement (column 3, above). For 2018, the additional standard deduction is $1,600 for an unmarried taxpayer or $2,600 for a married couple filing jointly when both spouses are age 65 or older.

Age 65 is a factor for all filing statuses except married filing separately. With that filing status, you must file a 2018 tax return if your income is greater than $5. This is a significant change from the previous filing requirements, and it’s because of the Tax Cuts and Jobs Act of 2017 (TCJA). Before this tax reform, a taxpayer filing as married filing separately had to file a return if their income was greater than the personal exemption ($4,050 in 2017).

Blindness is also a factor to be considered. If you aren’t totally blind, the IRS requires that you get a certified statement from an ophthalmologist or optometrist verifying that:

  1. You can’t see better than 20/200 in your better eye with glasses or contact lenses, or
  2. Your field of vision is 20 degrees or less

If you’re considered blind according to this definition, you can claim the additional standard deduction available to taxpayers age 65 or older, regardless of your age.

The final factor is income. For these purposes, the IRS defines income as all of the income you receive in the form of money, goods, property, and services that isn’t exempt from tax. That includes any income from sources outside of the United States or from the sale of your main home, even if you can exclude part or all of it. If you’re married and live with your spouse in a community property state, half of your combined income may be considered yours.

Do Dependents Need to File?

The IRS has separate rules for dependents, which are contingent upon the same factors of marital status, age, income, and blindness. In this case, the kind of income is also relevant, whether earned or unearned.

Earned income includes salaries, wages, tips, professional fees, and taxable scholarships and fellowship grants. Unearned income includes taxable interest, ordinary dividends, and capital gain distributions. It also includes unemployment compensation, taxable Social Security benefits, pensions, annuities, and distributions from a trust.

Filing StatusAge as of 12/31/18Minimum Income Requirement
SingleUnder 65 and not blind
  • Unearned income over $1,050
  • Earned income over $6,300
  • Gross income more than the larger of:
    • $1,050, or
    • Earned income (up to $11,650) plus $350
65 or older or blind
  • Unearned income over $2,650
  • Earned income over $13,600
  • Gross income more than the larger of:
    • $2,650, or
    • Earned income (up to $11,650) plus $1,950
65 or older and blind
  • Unearned income over $4,250
  • Earned income over $15,200
  • Gross income more than the larger of:
    • $4,250, or
    • Earned income (up to $11,650) plus $3,550
MarriedUnder 65 and not blind
  • Unearned income over $1,050
  • Earned income over $12,000
  • Gross income more than the larger of:
    • $1,050, or
    • Earned income (up to $11,650) plus $350
65 or older or blind
  • Unearned income over $2,350
  • Earned income over $13,300
  • Gross income more than the larger of:
    • $2,350, or
    • Earned income (up to $11,650) plus $1,650
65 or older and blind
  • Unearned income over $3,650
  • Earned income over $14,600
  • Gross income more than the larger of:
    • $3,650, or
    • Earned income (up to $11,650) plus $2,950

 

If your dependent child has only interest and dividend income, you may be able to elect to report the child’s income on your return and avoid filing a separate return for the child. For you to be able to make this election, all of the following requirements must be met:

  • Your child was under age 19 (or under age 24 and a student) at the end of the tax year
  • Your child’s income consisted only of interest and dividends
  • The interest and dividend income was less than $10,500
  • Your child doesn’t file a joint return with a spouse
  • No estimated tax payments were made for the tax year, and no overpayment was applied from a previous tax year
  • No federal income tax was withheld from the child’s income

If you meet all of the requirements outlined above, you may elect to report the child’s income on your return using IRS Form 8814.

Should I File a Tax Return Anyway?

There are other situations in which you must file a tax return, even if your income falls below the thresholds noted above. You must file a tax return if:

  • You owe any special taxes, including the following:
    • Alternative minimum tax (AMT)
    • Additional tax on a qualified plan, such as the penalty for early withdrawals from an IRA or non-qualified distributions from a Health Savings Account (HSA)
    • Social Security or Medicare tax on tips you didn’t report to your employer or on wages you received from an employer who didn’t withhold these taxes
    • Write-in taxes, including uncollected Social Security, Medicare, or railroad retirement tax on tips you reported to your employer or on group term life insurance
    • Household employment taxes
    • Recapture taxes (see Form 1040 instructions for line 11a and for Schedule 4, lines 60b and 62)
  • You or your spouse received Archer MSA, Medicare Advantage MSA, or health savings account distributions
  • You had earnings from self-employment of at least $400
  • You had wages of $108.28 or more from a church or qualified church-controlled organization that is exempt from employer Social Security and Medicare taxes
  • You received advance payments of the premium tax credit or the health coverage tax credit
  • You are required to include amounts in income under Section 965, or you have a net tax liability under Section 965 that you have deferred or are paying in installments (Section 965 has to do with transition tax on the untaxed foreign earnings of a foreign corporation if those earnings have been repatriated to the United States)

In other cases, it might be in your best interest to file a tax return even if you aren’t required to file. That may be the case if you had federal income tax withheld from your pay and can get all or some of that tax refunded.

It can also be beneficial to file if you qualify for refundable credits. Refundable credits can reduce your tax bill below zero, meaning you can get a tax refund that’s more than what you paid in for the year. Refundable credits include the Earned Income Tax Credit, the Additional Child Tax Credit, and the American Opportunity Tax Credit.

Keep in mind that if you’re filing a return solely to get a refund of federal tax withheld, you might want to decrease your withholding amount. The amount of federal income tax withheld from your paycheck is determined by the number of exemptions you claimed on the Form W-2 you completed when you were hired.

If you receive a refund year after year because you have too much federal income tax withheld, you can file a new Form W-4 with your HR department to increase your exemptions and decrease your withholding each pay period. This will increase your take-home pay and ensure you’re not giving an interest-free loan to the government every year.

On the other hand, if you seem to always owe taxes when you file, you might want to file a new Form W-4 to reduce the number of exemptions you claim and increase your withholding.

Final Word

You tax situation changes as you change jobs, get married or divorced, or have a child. Tax reform can also make significant changes to the income thresholds for filing a return. It’s a good idea to review the filing requirements each year to make sure you really do need to file a tax return or decide whether you might be able to take advantage of refundable credits.

Need more help? Be sure to check out our complete tax filing guide.

What is your tax situation this year? Do you need to file?

Janet Berry-Johnson
Janet Berry-Johnson is a Certified Public Accountant. Before leaving the accounting world to focus on freelance writing, she specialized in income tax consulting and compliance for individuals and small businesses. She lives in Omaha, Nebraska with her husband and son and their rescue dog, Dexter.

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