So why bother filing a tax return if there’s no income left after you subtract the deduction? For starters, you could be leaving money on the table. Learn more about why you might want to file taxes.
Income Thresholds for Federal Taxes
The amount of the standard deduction varies by filing status, and it’s usually adjusted each year to keep up with inflation. Every taxpayer is entitled to subtract the standard deduction from their income, so they’re only taxed on what remains. Below are the standard deductions for each filing status for tax years 2022 and 2023. You generally have to file a tax return if your income was more than the standard deduction for your filing status unless you’re over the age of 65—then, other rules apply. Taxpayers who are age 65 or older may have a little more leeway because they’re entitled to an extra standard deduction. For 2022, taxpayers who are 65 or older, or who are blind, are entitled to an additional $1,400 deduction. If the taxpayer is single and not a surviving spouse, that extra deduction goes up to $1,750. For 2023, taxpayers who are 65 or older, or who are blind, are entitled to an additional $1,500 deduction. If the taxpayer is single and not a surviving spouse, that extra deduction goes up to $1,850.
What if Someone Else Can Claim You as a Dependent?
Different income thresholds apply if someone else can claim you as a dependent, as well as the type of income—earned or unearned. You will need to file a tax return if your unearned income was $1,150 or more for the 2022 tax year. You’ll also need to file a tax return if your earned income is more than the standard deduction for an unclaimed single taxpayer, or $12,950 in 2022.
Unearned Income
For example, let’s say you’re single, 17 years old, not blind, and your parents claim you as a dependent. You made $1,200 in unearned income and no earned income. You need to file a tax return because that’s more than the unearned income threshold of $1,150. If all else was the same, but you were blind, you would not have to file because that’s less than the income threshold of $2,900 for 2022.
Earned Income
For example, let’s say you’re single, 16 years old, not blind, and your parents claim you as a dependent. You had $13,000 in earned income last year. You would have to file a tax return because that’s more than the threshold (which is also the standard deduction) of $12,950 for tax year 2022. You must also file a tax return if either your unearned or your earned income exceeds the applicable amount for your circumstances. For example, you would have to file a return if you had $1,151 in unearned income, even though you only had $10,000 in earned income, were single and under age 65 last year, and someone claimed you as a dependent. You may also have to file if your gross income is greater than the threshold computed for your circumstances. The $5 rule for married taxpayers filing separate returns still applies as well.
Other Filing Requirements
Some individuals must file regardless of whether their earnings exceed the amount of the standard deduction to which they’re entitled. Immigrants who are undocumented must typically file if they engage in any U.S. trade or business during the tax year. You must also file if you owe any sort of additional tax, such as:
The alternative minimum tax The “nanny tax” for household employees Taxes on tips that you didn’t report to your employer Additional tax on any qualified retirement plans or health savings plans to which you contributed
You must also file a tax return if you had both self-employment income of a certain amount or wages paid by a church or a qualified church-controlled organization that didn’t have to contribute Social Security or Medicare taxes on your behalf. These amounts are $400 and $108.28, respectively. You also must file if you, your spouse, or a dependent received advance payment of the premium tax credit or health coverage tax credit.
What Counts as Taxable Income?
All these thresholds and limits are based on earned and unearned income. Earned income typically comes from salaries, wages, or self-employment. Unearned income derives from things like interest and investment gains. However, some common types of income fall outside these parameters, so “gross income" rules apply. Gross income is your earned and unearned income added together. Unemployment compensation is typically also considered taxable income. Social Security benefits are only taxable if your gross income, tax-exempt interest, and half of your benefits combined exceed $25,000 if you’re single or $32,000 if you’re married and filing a joint return in tax year 2022. Married taxpayers who file separate returns may have to pay taxes on that income, as well.
Why You Might Want To File Even if You Didn’t Have Taxable Income
There are a few good reasons why you might want to file even if you technically don’t have to. You might be qualified to claim one or more refundable tax credits. You won’t get that money unless you file a tax return to claim it. If you had earned income that was less than the standard deduction and paid taxes through your paychecks, you may want to file to get some of that money back.
State Income Taxes
Many states impose income taxes, and the rules about who has to file can be vary by state and locality. Check with your state’s Department of Taxation for the rules that apply in the state where you live or work. You won’t have to worry about this, however, if you live or work in Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, or Wyoming. These states don’t have an income tax. If you live or work in New Hampshire, you will only be taxed on dividend and interest income. Taxpayers who live in Washington state will only need to pay taxes on capital gains income, and only if they are high earners.
