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How Much Money Do You Have to Make to Not Pay Taxes?

The amount that you have to make to not pay federal income tax depends on your age, filing status, your dependency on other taxpayers and your gross income. For example, in the year 2018, the maximum earning before paying taxes for a single person under the age of 65 was $12,000.

If your income is below the threshold limit specified by IRS, you may not need to file taxes, though it’s still a good idea to do so.

What this article covers:

How Much Money Can You Make Without Paying Taxes?

Not everyone needs to pay taxes. There are five things that determine whether you need to pay taxes. These are:

  • Filing status
  • Age
  • Dependents
  • Gross Income
  • Whether you’re blind

Based on Income

Based on the progressive income tax system, the amount of income tax that you need to pay each year depends on your income – this means that the more you earn, the more you pay. If your income equals or exceeds these amounts, you will need to file taxes. These tables are published by the IRS in Publication 17 and Publication 501 and are updated each year.

Tax Bracket

Source: https://www.forbes.com/sites/kellyphillipserb/2018/01/24/do-you-need-to-file-a-tax-return-in-2018/#40a9f91c1b2a

Filing Requirements for Dependents

Taxpayers who are claimed as dependents are subject to different rules for filing taxes.

Dependents include children under the age of 19 (or under 24 if they’re a student), or who are permanently disabled along with qualifying relatives (a member of the household or who lives with you year-round).  When their earned income is more than their standard deduction, taxes have to be filed. A dependent’s income is unearned when it comes from sources such as dividends and interest.

Single, under the age of 65 and not older or blind, you must file your taxes if:

  • Unearned income was more than $1,050
  • Earned income was more than $12,000
  • Gross income was more than the larger of $1,050 or on earned income up to $11,650 plus $350

If Single, aged 65 or older or blind, you must file a return if:

  • Unearned income was more than $2,650 or $4,250 if you’re both 65 or older and blind
  • Earned income was more than $13,600 or $15,200 if you’re both 65 or older and blind

If you’re married, under the age of 65 and not older or blind, you must file a return if:

  • Unearned income was more than $1,050
  • Earned income was more than $12,000
  • Your gross income was at least $5 and your spouse itemizes deductions
  • Your gross income was more than the larger of $1,050 or your earned income was $11,650 plus $350 

Married dependents, age 65 or older or blind must file a return when:

  • Your gross income was at least $5 and your spouse itemizes deductions
  • Unearned income was more than $2,350 or $3,650 if you are both 65 or older and blind
  • Earned income was more than $13,300 or $14,600 if you are both 65 or older and blind
  • Your gross income was more than $2,350 ($3,650 if both 65 and older and blind) or your earned income was $11,650 plus $1,650 ($2,950 if both 65 or older and blind)

How Much Can a Small Business Make Before Paying Taxes?

If you operate a small business, you must pay taxes on the income, regardless of the profit and loss. The tax return you must file depends on how your business is structured. For example, if you have a sole proprietorship you’ll file the schedule C with your personal tax return. 

If you’re a freelancer, you must also pay self-employment taxes for income more than $400. These taxes cover Medicare and social security taxes.

Sole proprietors must file IRS Form 1040, Schedule C and Schedule SE if your net income is greater than $400. If you have an employee, you will need to withhold federal and state income taxes and Social Security and Medicare taxes for each employee.

How Can I Reduce My Taxable Income?

One way to reduce taxable income is by topping up your retirement savings with traditional (not Roth) IRAs and 401(k)s, up to the maximum allowable contribution. 

Contributions to Health Savings Accounts (HSA) and Flexible Spending Accounts (FSA) are another way to shrink your taxable income.

You could potentially earn thousands of dollars before paying taxes. However, even when your income falls below the cut-off level and you do not have to pay taxes, you need to file to taxes to get a refund check.

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