If you’re a low-income earner, you might be wondering if you even need to file a tax return. While the IRS doesn’t require everyone to file, there are benefits to doing so—even if your income falls below the filing threshold. This quick guide will help you understand whether you need to file, when it may be beneficial, and what credits or refunds you could receive by filing.
- Income Thresholds for Filing
The IRS sets income thresholds each year to determine who must file a tax return. These thresholds vary based on your filing status, age, and income type. If your income is below the threshold for your category, you generally aren’t required to file.
For 2024, here are some filing thresholds:
- Single filers under 65: $13,850
- Single filers 65 or older: $15,700
- Married filing jointly (both spouses under 65): $27,700
- Married filing jointly (one spouse 65 or older): $28,700
- Head of household under 65: $20,800
- Head of household 65 or older: $22,650
If your income is below these levels, you likely won’t need to file. However, certain types of income, such as self-employment income over $400 or any unemployment benefits, may require filing even if total income is low.
- Situations That Require Filing Regardless of Income
Some situations mandate that you file a tax return, regardless of your total income. You’ll need to file if:
- You had self-employment income over $400.
- You received healthcare subsidies through the Affordable Care Act (ACA).
- You owe special taxes like the Alternative Minimum Tax (AMT) or household employment tax.
- You had unearned income, such as from investments or dividends, above certain limits.
- Benefits of Filing Even If Not Required
Even if you’re not required to file, there are often advantages to doing so, especially for low-income individuals. Filing a return can lead to tax credits or refunds that may benefit you financially.
Earned Income Tax Credit (EITC)
The Earned Income Tax Credit is a refundable credit for low- to moderate-income earners, designed to help individuals and families. If you qualify for the EITC, you could receive a tax refund even if you owe no tax. For 2023, the maximum credit can range from $600 to $7,430, depending on income and family size.
Child Tax Credit
If you have children, the Child Tax Credit (CTC) offers a significant refund opportunity. Even if your income is low or you owe no tax, you may qualify for a portion of the CTC as a refundable credit.
Education Credits
If you’re a student or paying off student loans, education credits like the American Opportunity Tax Credit (AOTC) or Lifetime Learning Credit can provide financial relief for education-related expenses. These credits can apply even with low income, making filing worthwhile for students.
Recovery Rebate Credit
If you missed out on any stimulus payments (Economic Impact Payments) issued during recent years, you can claim the Recovery Rebate Credit by filing a tax return. This could be especially useful if your income was too low to qualify for the original payments.
Withholding Refunds
If you had any income taxes withheld from wages, Social Security benefits, or other payments, you might be eligible for a refund. Filing a return is the only way to receive this refund.
- Filing Requirements for Dependents
If you’re claimed as a dependent on someone else’s tax return (such as a parent or guardian), different filing requirements apply. Dependents generally need to file if they earned:
- More than $1,250 in unearned income (from sources like interest or dividends).
- Over $12,950 in earned income (wages, salaries, etc.).
If you meet either threshold, you may be required to file, even though you’re claimed as a dependent.
- How to File a Return for Free
If you’re a low-income taxpayer, there are several free options for filing:
- IRS Free File Program: The IRS offers free online filing for taxpayers with an income below $73,000. This option is available through various tax preparation partners.
- Volunteer Income Tax Assistance (VITA): The IRS’s VITA program provides free tax preparation for individuals with income below $60,000, as well as for people with disabilities or limited English-speaking skills.
- Free Tax Software: Many tax software providers offer free versions for simple tax returns, which can be ideal for low-income filers.
- Special Situations: Self-Employment and Gig Work
If you earned income through self-employment, freelancing, or gig work (such as rideshare driving), you must file a tax return if you earned over $400 from these sources. The IRS considers these earnings as self-employment income, and you may be subject to self-employment taxes (Social Security and Medicare). Filing allows you to report income accurately and claim business-related deductions, reducing your taxable income.
- What Happens if You Don’t File?
If you’re not required to file, you won’t face penalties for skipping a tax return. However, if you’re due a refund (e.g., from the EITC, CTC, or withheld taxes), you have a limited window to claim it. You generally have three years from the original tax deadline to file and receive a refund. Missing this window means you forfeit any potential refund.
Final Thoughts
If your income is low, you may not be required to file a tax return, but filing can still benefit you in many ways. Tax credits like the EITC and Child Tax Credit, as well as potential refunds from withholding, can put extra money in your pocket. Take time to check the income thresholds and assess your situation to see if you’re eligible for credits or refunds. By filing, you might be able to maximize your benefits, even on a modest income.
