As the tax start date and inevitable deadlines approach, I wanted to share something that may come as a surprise to many – not all income-earning Americans are legally obligated to file a federal tax return. In fact, there are gross income level thresholds that, if not surpassed, may result in an individual (or married) filer not being required to file a tax return with the IRS.
However, just because you may be able to avoid filing taxes, it doesn’t mean you should. I’ll discuss why you might want to file a tax return for your own benefit, even if you are not required to, later in this article.
The minimum income tax filing thresholds vary based on age and tax filing status and closely resemble the post tax-reform higher standard deduction amounts. If you surpass these income thresholds, you typically must file a tax return. The income thresholds for 2021 (for 2020 tax year prep), are detailed in the IRS’s 1040 instructions, and are as follows:
Single Minimum Income to File Taxes:
In 2021, when filing as “single”, you need to file a tax return if gross income levels in 2020 are at least:
- Under 65: $12,400
- 65 or older: $14,050
Married Filing Jointly Minimum Income to File Taxes:
In 2021, when filing as “married filing jointly”, you need to file a tax return if gross income levels in 2020 are at least:
- If both spouses are under 65: $24,800
- If one spouse is under 65 and one is 65 or older: $26,100
- If both spouses are 65 or older: $27,400
Married Filing Separately Minimum Income to File Taxes:
In 2021, when filing as “married filing separately”, you need to file a tax return if gross income levels in 2020 are at least:
- All ages: $5
Head of Household Minimum Income to File Taxes:
In 2021, when filing as “head of household”, you need to file a tax return if gross income levels in 2020 are at least:
- Under 65: $18,650
- 65 or older: $20,300
Qualifying Widower (with Dependent Child) Minimum Income to File Taxes:
In 2021, when filing as “qualifying widow(er) with dependent child”, you need to file a tax return if gross income levels in 2020 are at least:
- Under 65: $24,800
- 65 or older: $26,100
Self-Employed Minimum Income to File Taxes:
In 2020, regardless of age, if you had self-employment income, you need to file a tax return if net self-employment income is $400 or more, even if your gross income is below the amounts listed above for your filing status.
Do I Need to File a Tax Return?
In addition to those surpassing the income levels above, if you were paid via a 1099-MISC form or you purchased health insurance on a state or federal exchange, you may also be required to file a return.
The income levels provided above are general guidelines provided by the IRS, but there are a number of exceptions (e.g. if you or your spouse are claimed as a dependent, are blind, etc.). When in doubt on whether you need to file a tax return or not, I would highly recommend using the IRS’s interactive tax assistant tool, aptly titled “Do I Need to File a Tax Return?“.
If you have a complicated tax situation, I would also recommend reviewing chapter 1 of IRS Publication 54, as it covers self-employment income, foreign earned income, citizenship status, and much more, in great detail.
The Better Question: “Should I File a Tax Return?”
Just because you can avoid filing a tax return – it doesn’t mean you should. There may be cases where you are below the minimum income levels, and it would still be advantageous to file a tax return, even if you are not required to. In some cases, you may be eligible for a refundable tax credit, and could be leaving money on the table if you do not file return. Here are a few examples:
- Earned Income Tax Credit: the Earned Income Tax Credit (EITC) is a significant tax credit for lower and lower-middle income taxpayers that rewards earned income, particularly for those with children. And it is refundable.
- Child Tax Credit: with changes to the Child Tax Credit, up to $1,400 of the credit can be refundable for each qualifying child.
- American Opportunity Tax Credit: up to 40% of the American Opportunity Credit (one of a few educational tax credits and deductions), is refundable. The refundable portion is capped at $1,000.
- The Premium Assistance Tax Credit: under some circumstances, a taxpayer with health insurance purchased through the health insurance marketplace may be eligible for subsidies help offset premium costs. Any subsidies not paid by the IRS directly to the insurance company may be available to the tax filer in the form of a refundable tax credit.
- Economic Impact Rebate Recovery Credits: with the COVID-19 stimulus bills authorizing payments to most Americans, if you have not received a stimulus payment, you may be eligible to receive a Rebate Recovery Credit if you file a tax return.
It’s also worth noting that aside from your federal tax filing status, some states require filing at any level of income.
And, finally, there are identity theft protection reasons to file a return even if you do not have to. Identity theft on false tax returns has been rampant in recent years, and if you do not file a return, it is possible that someone else could file a false one in your name. Filing a proper return in your name helps to protect you against this threat.
How to File Your Taxes
If you’re unsure about whether you need to file your taxes or not, or if it would be beneficial to do so, I would recommend that you go ahead and file.
- H&R Block: 20% off at link for paid versions
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Want more tax filing tips? Check out my guide on the basics of how to do your taxes.