As the old saying goes, one thing you can't avoid in life is taxes. But that doesn't necessarily mean you have to file every single year. During most of your life, filing taxes is an annual struggle. Filing taxes for beginners is usually straightforward, but things can become exponentially more complicated the more money you make.
But eventually, you may get to a point where you no longer have to pay taxes yearly. It all depends on your income.
Understanding Income Thresholds
It's a common misconception that you must pay taxes on every dollar of your annual income. However, that's not necessarily true. Most taxpayers qualify for the standard deduction. The IRS determines the deduction amount every tax year, and your eligibility varies based on age and filing status.
In 2022, the standard deduction for single filers was $12,950. For couples, it was $25,900. Head of household filers got a deduction of $19,400.
Why does this matter when determining if you have to file? A standard deduction reduces your taxable income. So if you earn less than the standard deduction, you owe nothing and don't have to file a tax return!
There are a few exceptions, so it's always a good idea to seek professional guidance. For example, self-employment income requires a tax return regardless of your earnings.
What about Social Security
When you start to understand the complexities of filing taxes for beginners, you usually don't have to worry about social security. But your tax situation will change when you can finally take out benefits.
You don't have to file a tax return if your income is solely social security benefits. Social security is not taxable income.
Once again, there are exceptions. If you're married but file a separate tax return from a spouse you live with, you may have to pay some taxable income. The same goes for earning tax-exempt interest.
If you're unsure about taxable income and the need to file a return, it's worth going to a professional tax preparer. It's better to be on the safe side than to ignore filing duties entirely.
Author Resource:-
Daniel Stewart has been helping people with their money management and personal finance with over 15 years’ experience in business finance. You can find his thoughts at savings guide blog.