How Much Do You Have to Make to File Taxes? It's essential to know how much you have to make to file taxes. Keep reading this article to find out all you need to know.
By Dan Bova
The 2022 tax year has ended, which means tax season is coming. It's time to start gathering your tax forms and making appointments with a tax professional, TurboTax or your favorite tax software.
It is possible to file taxes directly with the IRS if you prefer to complete the process independently. When it comes to filing taxes, many stipulations come with different amounts of income and types of filing.
What is income tax?
Understanding the American tax system's intricacies is paramount when managing your finances to ensure you are compliant with the law. Income tax is one of the critical components of the tax system, and if you are someone who earns a wage, salary or other forms of compensation, then you might owe taxes this year.
Understanding what income taxes are is vital as you go through tax preparations leading up to the federal due date. The amount of income tax you owe and your income tax return is determined by the taxable income you earn throughout the year.
Tax brackets operate so that higher income gets taxed at a higher rate, with a staggered system as incomes decrease.
In the United States, income tax funds several government operations, such as:
- National defense.
- Education.
- Infrastructure.
- Social Security benefits.
- Medicare and Medicaid health insurance.
Keep reading for more information on the different types of income taxes.
Related: Tax Credits are the Incentives in the Inflation Reduction Act
Federal income tax
Federal income tax is a tax imposed by the federal government upon the income earned by people in the US. It is calculated based on taxable income, which is determined by subtracting standard deductions and exemptions from gross income.
A person's taxable income determines their tax bracket, which then decides how much a person's income will be taxed. In 2022, the highest income tax rate was 37%.
State income tax
Most states in the US impose an income tax. Each state has specific tax rates, rules and regulations, but they generally follow a similar structure to the federal income tax. The method of taxing is different from state to state, as some impose a flat rate tax and others operate on a progressive tax system with several tax brackets.
States that do not collect income tax are:
- Alaska.
- Florida.
- Nevada.
- South Dakota.
- Tennessee.
- Texas.
- Wyoming.
Payroll tax
Payroll tax is shared by employers and employees and is allocated towards Social Security and Medicare. In 2022, employers were required to pay 7.65% for Social Security, and the rate for Medicare tax was 1.45%.
Related: 7 Small Business Tax Deductions You Need To Know
Capital gains tax
People must pay special taxes when they gain income from investments like stocks, bonds or real estate. For capital gains, the tax fate depends on the holding period of the investment as well as the taxpayer's overall income.
If an investor owns the capital for less than a year, known as short-term capital, this is simply taxed as ordinary income. However, if an investor owns the capital for more than a year, known as long-term capital, they are taxed at a lower rate. In 2022, the top rate for capital gains tax was 20%.
Self-employment tax
Self-employment tax is owed by those without an employer who therefore don't contribute to Social Security and Medicare through their employer.
Self-employment tax makes up for that lack by requiring self-employed people to contribute to the system. In 2022, the self-employment tax rate was 15.3% of net self-employment income.
Related: These Are the Top Tax Filing Mistakes Made by Small Business Owners (and How to Avoid Them)
Alternative minimum tax (AMT)
Alternative minimum tax (AMT) is a separate tax system that applies to taxpayers with either a high income or many deductions. This type of tax is meant to ensure that high-income taxpayers cannot use deductions to reduce their tax payments.
There are different sets of rules with Alternative Minimum Tax and different tax bracket structures that calculates liability. Taxpayers that qualify for AMT must calculate their tax bill under each system and pay the higher amount.
Related: The 3 Best Ways to Save on Taxes When You Have Multiple Business Ventures
How much money do you have to make to file taxes?
The answer is not as straightforward as a single number for minimum income.
Tax filing is contingent upon various factors, including age, income threshold and filing status — single, married filing jointly, head of household, married filing separately and qualifying widow(er).
Keep reading to learn more about the different filing situations and how much you have to make to file taxes for each.
Income requirements for filing a tax return
- Single
- Under 65: $12,950.
- 65 and older: $14,700.
- Married couples (filing jointly)
- Under 65: $25,900 if both spouses are under age 65 and $27,300 if one spouse is under age 65 and one is 65 or older.
- 65 and older: $28,700 if both are 65 or older.
- Head of household
- Under 65: $19,400.
- 65 and older: $21,150.
- Married (filing separately)
- Under 65: $5.
- 65 and older: $5.
- Qualifying widow(er)
- Under 65: $25,900.
- 65 and older: $27,300.
Related: Your Tax Refund Could Be Smaller Next Year, IRS Warns — Here's Why
Income requirements for filing a tax return for dependents who are single
- Unearned income larger than:
- Under 65: $1,150.
- 65 and older: $2,900.
- 65 and older and blind: $4,650.
- Earned income larger than:
- Under 65: $12,950.
- 65 and older: $14,700.
- 65 and older and blind: $16,450.
- Gross income was more than the larger of:
- Under 65: $1,150 or earned income (up to $12,5500) plus $400.
- 65 and older: $2,900 or earned income (up to $12,550) plus $2,150.
- 65 and older and blind: $4,600 or your earned income (up to $12,550), plus $3,900.
Income requirements for filing a tax return for dependents who are married
- Unearned income larger than:
- Under 65: $1,150.
- 65 and older: $2,550.
- 65 and older and blind: $3,950.
- Earned income larger than:
- Under 65: $12,950.
- 65 and older: $14,350.
- 65 and older and blind: $15,750.
- Gross income was more than the larger of:
- Under 65: $1,150 or your earned income (up to $12,550) plus $400.
- 65 and older: $2,550 or your earned income (up to $12,550) plus $1,800.
- 65 and older and blind: $3,950 or your earned income (up to $12,550) plus $3,200.
Related: When Will I Receive My Advance Child Tax Credit Check?
How can you find out if you have to file income taxes?
The tax system is complex, especially when it comes to income taxes. With the several types of income tax, you will likely become a tax filer at some point in your life.
The best way to ensure you meet all tax laws and filing requirements is to complete thorough research, consult a tax professional or utilize an e-file platform that does much of the work for you.
For more information on taxes, visit Entrepreneur.com.
