If your income is below the minimum required for filing an income tax return, or if you don't expect a refund, you may be tempted to skip it. But if you do, you might miss out on some tax credits. You could even pay zero income tax and still get a check from the Internal Revenue Service.
The minimum for a required return depends on your age, filing status, and other factors (such as whether you netted at least $400 from self-employment). For the 2022 tax year, the minimum income ranges from $10,275 for single filers under age 65 to $20,550 for “qualifying widow(ers)” who are 65 or older ($11,000 to $22,000 for 2023).
Even if you don’t have to pay taxes on your earned income, there are several reasons why filing a return may be worth it. First of all, you could end up with a refund via a tax credit. And if you're not eligible for a refund, you still may need to file to avoid a penalty for filing late or not filing.
- Even if you don't owe taxes, filing a return may be well worth the effort.
- Federal minimums range from $10,275 to $20,550 for the tax year 2022 ($11,000 to $22,000 for 2023), but even if you fall below that, you may be eligible for certain credits that will lead to a tax refund.
- You may be owed a payment through the Earned Income Tax Credit program.
- For 2022, the tax credit is worth between $560 and $6,935 ($600 and $7,430 for 2023).
- Other tax credits are available for parents, health insurance costs, and more.
- In any case, if your employment income is low, but you made money in other ways, you may be required to file.
Refund Due: You Had Tax Withheld
If you’re married, filing jointly, and under age 65, you don’t have to file a tax return if your household income is below $20,550 for the 2022 tax year ($22,000 for 2023). However, that doesn’t mean that your employers didn’t withhold taxes.
Filing a tax return will get you a refund of those withholdings, provided that you have no other taxes due. It’s as easy as completing an IRS Form 1040. In most cases, companies like TurboTax or H&R Block will allow you to complete the form using their free online software.
And, if you’re eligible for one of these five tax credits, it’s worth filing your federal income taxes.
Earned Income Tax Credit (EITC)
Congress set up the Earned Income Tax Credit (EITC) to allow lower-wage earners to hold onto more of their paychecks.
Households that qualify for the credit can reduce their tax liability to zero, which means they will owe no income taxes. If your tax obligation is less than the amount of the credit, you may be eligible for a cash refund of the remaining credit amount.
To qualify for the EITC, a taxpayer’s earned and adjusted gross income (AGI) must be below certain income limits. For the 2022 and 2023 tax years, the maximum credit that a single or married taxpayer could claim is as follows:
|EITC Income Limits for 2022 Tax Year|
|Number of Children||Single or Head of Household 2022||Single or Head of Household 2023||Married Filing Jointly 2022||Married Filing Jointly 2023||Maximum Credit 2022||Maximum Credit 2023|
Child Tax Credit
The IRS provides a credit for each dependent child for lower-income earners. If your tax burden is lower than the maximum credit, you may get a refund.
The Child Tax Credit is currently $2,000 per minor dependent for tax years 2022 and 2023. This tax credit is phased out for higher-income families, as it was intended to help low- to middle-income workers. To qualify, you are subject to maximum income requirements.
American Opportunity Tax Credit
The American Opportunity Tax Credit (AOTC) reimburses taxpayers up to $2,500 a year for qualified education expenses.
This credit was recently expanded to allow those who do not owe any taxes to still qualify for a refund. If you paid college tuition or other qualified education expenses, this generous tax credit could provide a nice refund check but is limited to a maximum of four years of eligibility per student.
Health Insurance Marketplace Premium Tax Credit
This tax credit, often known simply as the premium tax credit, helps low- to moderate-income singles and families pay the premiums associated with health insurance purchased through the Health Insurance Marketplace under the Affordable Care Act (ACA).
To be eligible for the premium tax credit, your household income must be at least 100%—but no more than 400%—of the federal poverty line for your family size. Other qualifications apply, so click here to see whether you are eligible.
You may be eligible for an additional tax credit for some portion of the money that you put into a qualified retirement savings plan, such as a 401(k) or an individual retirement account (IRA).
This credit is subject to income limitations, with a cap of $68,000 for those who are married and filing jointly or $34,000 for individual filers for the 2022 tax year ($73,000 and $36,500 for 2023).
Known as the saver’s credit, this nonrefundable credit allows the lesser of $1,000 ($2,000 if filing jointly) or the amount in taxes you would have had to pay without the credit.
Avoid a Penalty for Not Filing
Even if you didn’t make enough money to meet the IRS minimums to be owed a refund, there are still good reasons to file your federal taxes. For instance, say you were self-employed and earned slightly more than $400 during the year. But you also sold your home for a profit and withdrew money from a retirement account.
You could owe Social Security or Medicare taxes that were not withheld, or you could be subject to the alternative minimum tax (AMT), which would require a return to be filed.
It's best to ensure you don’t have to file a return. There could be IRS penalties and back taxes owed if you have to file later.
Is a Tax Credit a Refund?
A tax credit is not a refund; it is a credit on your income that reduces the taxable amount. However, a credit can result in a refund if when you've applied the credit, you've paid more than you owe.
What Does Tax Credit Mean?
A tax credit is a concept used by the IRS that reduces a taxpayer's taxable income. A tax credit usually reduces the amount of taxes you owe for the year.
Is the Child Tax Credit a Refund?
The Child Tax Credit is a $2,000 per child credit, which reduces your overall taxable income. However, you may receive a refund of up to $1,500 as a result of the Child Tax Credit for the tax year 2022 ($1,600 for 2023).
The Bottom Line
You should always assume that you should file a tax return, even if you didn’t make enough money to file one—you may be owed substantial tax credits even if your tax bill will be essentially zero. Taking the time to read about the credits available could result in a healthy check from the IRS.
Internal Revenue Service. "Self-Employment Tax (Social Security and Medicare Taxes)."
Internal Revenue Service. "Rev. Proc. 2022-38," Pages 6-7.
Internal Revenue Service. "Rev. Proc. 2021-45," Pages 5-7.
Internal Revenue Service. "Who Should File a Tax Return."
Internal Revenue Service. "Rev. Proc. 2021-45," Page 10.
Internal Revenue Service. "Rev. Proc. 2022-38," Page 10.
Internal Revenue Service. "IRS Provides Tax Inflation Adjustments for Tax Year 2023."
Internal Revenue Service. “IRS Provides Tax Inflation Adjustments for the Tax Year 2022."
Internal Revenue Service. “Publication 501, Dependents, Standard Deduction, and Filing Information,” Page 5.
U.S. Congress. “H.R.1436 — EITC Modernization Act of 2019.”
Internal Revenue Service. “Earned Income Tax Credit.”
Internal Revenue Service. "What You Need to Know about CTC, ACTC and ODC."
Internal Revenue Service. “American Opportunity Tax Credit.”
Internal Revenue Service. “Eligibility for the Premium Tax Credit.”
Internal Revenue Service. “The Premium Tax Credit — The Basics.”
Internal Revenue Service. "401(k) Limit Increases to $22,500 for 2023, IRA Limitr Rises to $6,500."
Internal Revenue Service. “Retirement Savings Contributions Credit (Saver’s Credit).”
Internal Revenue Service. “Topic No. 653 IRS Notices and Bills, Penalties, and Interest Charges.”
Internal Revenue Service. "Credits and Deductions for Individuals."
Internal Revenue Service. "Rev. Proc 2022-38," Page 9.
Internal Revenue Service. "Rev. Proc 2021-45," Page 9.
Tax Deductions and Credits Guide
What Is Tax Relief? How It Works, Types, and Example
Tax Benefit: Definition, Types, IRS Rules
Tax Break Definition, Different Types, How to Get One
Tax Deductions That Went Away After the Tax Cuts and Jobs Act
Tax Credits That Can Get You a Refund
Nonrefundable Tax Credit: Definition, How It Works, and Benefits
Earned Income Tax Credit (EITC): Definition and How to Qualify
Saver’s Tax Credit: A Retirement Savings Incentive
Unified Tax Credit: Definition and Limits
General Business Credit (GBC)
Foreign Tax Credit: Definition, How It Works, Who Can Claim It
Dependents: Definition, Types, and Tax Credits
How Much Does a Dependent Reduce Your Taxes?
Child and Dependent Care Credit Definition
Child Tax Credit Definition: How It Works and How to Claim It
Additional Child Tax Credit (ACTC): Definition and Who Qualifies
What Was the Hope Credit? How It Worked and Replacement
American Opportunity Tax Credit (AOTC): Definition and Benefits
Tax Deduction Definition: Standard or Itemized?
Itemized Deductions: What It Means and How to Claim
Tax-Deductible Interest: Definition and Types That Qualify
Charitable Contribution Deduction: Rules and Changes for 2022 and 2023
20 Medical Expenses You Didn’t Know You Could Deduct
Educator Expense Deduction
Top Tax Advantages of Buying a Home
Calculating the Home Mortgage Interest Deduction (HMID)
Tax Breaks for Second-Home Owners
Rental Property Tax Deductions
Getting U.S. Tax Deductions on Foreign Real Estate
401(k) vs. IRA: What’s the Difference?
IRA Contributions: Deductions and Tax Credits