Every year, many self-employed citizens and part-time workers feel they might not have to pay tax on their earnings. However, there is no specific rule that specifies the minimum one needs to make before paying taxes. The employment status and age determine if one will file taxes. It is, however, easy to decide on which rule might apply to a specific taxpayer.
How the IRS Defines Earnings
According to Uncle Sam, "earnings" can be defined as wages, tips, or salaries that an individual gets from an employer or themselves (self-employed) due to services rendered. According to the IRS, other payment can also be classified as earnings:
Benefits from a union strike
Royalties
Prepaid income
Rents paid on properties.
Factors like employment status, the individual's gross income, dependency status, etc., affect the IRS minimum income status.
Besides, every state has its unique tax rules and what they define as income. Similarly, there are no income taxes in some states. Your local tax office will guide you on the rules that apply to you.
Self-Employed People
People that are self-employed, including freelancers with a net earning of over $400 a year, have to file tax.
Wage Earners
The filing status determines the minimum income for wage earners. Anyone earning the amount specified below will have to file taxes
Source: Internal Revenue Service
Retired Citizens
Retirees enjoy a higher taxable income level. This means that they can earn slightly more than non retired citizens without bothering about taxes. The following reveals the minimum earning by status for retiree
Considerations for Social Securities
The following rules apply to people that qualify for social security benefits.
People whose joint earnings fall in the range of 25,000 and 34,000 USD might be taxed on 50% of their social security earnings.
People with joint earnings of more than $34,000 might be taxed on 85% of their social security earnings.
People who file jointly with a total earning in the range of 32,000 and 44,000 will be taxed on 50% of their Social security earnings.
People filing jointly with a total earning of more than 44,000 USD will be taxed on 85% of their social security earnings.
Dependents
Here are the conditions for a dependent to submit a tax. The person must have earned
More than $6,300 in wages over the years
More than $400 as self-employment income
$950 and above as interest income
As long as the combined earned wage alongside the interest income is more than $1,050, they must file taxes.
Earned Income Tax Credit
Uncle Sam allows low-income earners to have an earned income tax credit (EITC) on their account. With this credit, people that qualify can retain a larger part of their income. Only the following group of people can enjoy the credit:
Singles without children with earning below $14,880
People with a single qualifying child earning below $39,296
People with two qualifying children earning below $44,648
People with three children, and more, with income below $47,955
Other limits will bound married taxpayers who are filing jointly. For such, their annual income must be below:
$20,430 for people not claiming any child
$44,846 for one child claimed
$50,198 for claiming two qualified children
$53,505 for claiming three qualified children or more
Alongside these income limits, taxpayers earning over $3,400 in dividend income or interest does not qualify for EITC. Taxpayers need to submit their tax return to claim the credit. Citizens can estimate the credit value using the IRS EITC assistant tool.
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