They say that nothing is certain but death and taxes. However, is this really true? Will you be able to stop filing your taxes at some point? What about during retirement? And what should you know about doing so? Here are answers to every American taxpayer's questions.
Do You Ever Stop Filing Taxes?
The United States' income tax system is based on income rather than age. This means that you never age out of tax obligations, nor are even the youngest children inherently exempt. Child actors and septuagenarians can both be obligated to file if they earn sufficient income.
What Could Cause You to Stop?
Even though there are no age triggers that allow you to automatically stop being subject to income tax, there are reasons it happens. If you stop working and earning an income, of course, there's no income to tax. However, if you file jointly with your working spouse, your shared income is pooled and both parties are liable for the shared tax.
In general, many retirees whose only, or primary, source of income is Social Security is not subject to income tax. As of 2023, those who receive Social Security benefits or benefits and other income of $50,000 or less may not have to file taxes. Also, some disability insurance payments and benefits like VA payments may be tax-free.
Can You Still Gain Tax Benefits?
What happens if you do find yourself one of those who no longer have to file taxes for income reasons? You can still get some tax benefits in one of two ways.
The first applies when you do earn some income, but not enough for taxes to be mandatory. You may still file an income tax form to take advantage of refundable tax credits. These — including the Additional Child Tax Credit, American Opportunity Credit, and Earned Income Credit — may result in a refund even though you owe no taxes.
The second way to benefit in your circumstances is through another taxpayer. If you have little or no income, you may qualify as a dependent of another taxpayer who provides support for you. Claiming you — at any age — brings some tax deductions and credits for them, and thus for your household.
Where Can You Learn More?
The American tax system is confusing. The best place to learn whether you have a tax obligation and whether you may qualify for other tax benefits is to meet with a qualified tax preparer in your state today.
Contact an accountant to learn more about taxes.