How Much Can You Make Before You Have to File a Tax Return? - Motley Fool

Filing a tax return isn't fun, but it's an annual requirement most Americans have to fulfill. Not everyone has to send in forms to the IRS, though. If your income doesn't exceed a certain level, you may be relieved of the obligation. 

Of course, while you may not be required to file a 1040 form, there are still circumstances where submitting one makes sense. In fact, you could be leaving lots of money on the table if you don't claim credits you're entitled to receive, even if you aren't legally required to file a return. 

So, how much do you need to make in income before you have to file, and why would you want to submit a 1040 tax form if you're not required to? Read on to find out. 

Image source: Getty Images.

How much can you earn before being required to file income taxes?

The amount of money you're able to earn before you're required to submit a tax return to the IRS depends on your filing status.

• If you would file as single, you don't have to submit a tax return unless your gross annual income is at least $12,200, or $13,850 if you're 65 and up.
• If you would file as married filing jointly or qualified widow(er), you only have to file if your gross income is at least $24,400 if both spouses are under 65. If one spouse is 65 or older and the other isn't, you don't have to file unless your income is at least $25,700. And if both spouses are 65 or older, you can earn up to $27,000 before you must file.
• If you'd file as married filing separately, you always must file with a gross income of at least $5 (nope, that's not a typo!).
• If you'd file as head of household, you must file with a gross income that's at least $18,350 if you're under 65 or $20,000 and up if you're 65 or older. 

If you're claimed as a dependent on someone else's taxes, there are different requirements, which vary depending on if you're 65 or over and whether you have earned or unearned income. 

Why is the income threshold so high for some?

Taxpayers in the U.S. are required to pay taxes on income minus deductions.

You could itemize and claim a deduction for specific things, such as mortgage interest paid. If you itemize, you always have to file a return to tell the IRS what you're deducting. But there's also a standard deduction you could choose to claim instead.

The income you could earn without having to file equals the standard deduction amount. In 2019, for example, the standard deduction was $12,200 for singles. So, if you had income below this threshold and claimed the standard deduction, your taxable income would go below $0 so you usually wouldn't have to file a return.

And since seniors have a higher standard deduction, they can earn more income without having to file.

When should you file a tax return anyway?

There are certain situations when you must file a tax return even if you don't meet the income thresholds. These include the following:

• You owe special taxes such as household employment taxes or alternative minimum tax.
• You or a spouse you're filing jointly with received distributions from a health savings account.
• You had $400 or more of net earnings from self-employment.
• You received wages of $108.28 or more from a church exempt from FICA taxes.
• You received Obamacare subsidies to buy health insurance.

If none of these situations applies and you aren't required to file a return, you may want to anyway. You should if you had taxes withheld from your paycheck and want to get your refund. You should also file if you think you may be eligible for refundable tax credits such as the Child Tax Credit. A refundable tax credit is one you can receive even if you paid little or no taxes. For example, up to $1,400 of the child tax credit is refundable. If you owe $0 in taxes and are eligible for it, you could file a tax return to get a $1,400 refund. 

Now you know whether you have to file a tax return -- and why you may want to submit an optional return

Understanding IRS rules can be complicated, but it's important to know what you're required to do since failure to file a required tax return could have serious financial consequences. And since tax credits can be pretty valuable, it makes sense to look into whether you could get money back even if you aren't mandated to file because your income is low. 

You don't want to owe penalties to the IRS or miss out on free money, and now you won't have to since you know the basics.

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How Much Can You Make Before You Have to File a Tax Return? - Motley Fool
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