Does My 18-Year-Old Need to File Taxes?

For young adults, understanding tax obligations is an important step as they begin their financial independence. For an 18-year-old, determining whether a tax return is necessary involves navigating specific income thresholds and dependency rules. Being aware of these requirements can help ensure compliance and potentially unlock financial benefits.

Understanding Tax Filing Requirements

Whether an 18-year-old must file a federal income tax return depends on their gross income, which includes all money, goods, property, and services received that are not tax-exempt. The Internal Revenue Service (IRS) sets specific income thresholds that vary based on the type of income received. For the 2024 tax year, if an 18-year-old’s earned income, such as wages or salaries, exceeds $14,600, they generally must file a tax return. This earned income figure encompasses pay for work performed, including tips and self-employment earnings.

If an 18-year-old has unearned income, which comes from investments like interest, dividends, or capital gains, the filing threshold is considerably lower. For 2024, a tax return is required if their unearned income is more than $1,300. If they have both earned and unearned income, a more complex calculation determines their filing requirement.

How Dependency Status Affects Filing

An 18-year-old’s tax filing obligations are influenced by whether they can be claimed as a dependent. If an 18-year-old is a qualifying child or qualifying relative, their standard deduction is limited. For the 2024 tax year, a dependent’s standard deduction is limited to the greater of $1,300 or their earned income plus $450, not exceeding the basic standard deduction for a single filer, which is $14,600. This reduced standard deduction means a dependent 18-year-old has a lower income threshold for filing.

The “kiddie tax” rules apply to the unearned income of certain dependents, including those who are 18 years old. For 2024, if an 18-year-old dependent has unearned income exceeding $2,600, a portion of that income may be taxed at their parent’s marginal tax rate. Specifically, the first $1,300 of unearned income is tax-free, the next $1,300 is taxed at the child’s rate, and any unearned income above $2,600 is subject to the parent’s tax rate.

Why File Even if Not Required

Even if an 18-year-old’s income falls below the mandatory filing thresholds, filing a tax return can be financially advantageous. A primary reason to file is to receive a refund of any federal income tax withheld from their paychecks. Employers typically withhold taxes based on information provided on Form W-4, and if too much was withheld, filing a return is the only way to get that overpayment back.

Additionally, filing a return allows an 18-year-old to claim various refundable tax credits for which they might be eligible. For example, if they are pursuing higher education, they might qualify for education credits, such as the American Opportunity Tax Credit, which can provide a credit of up to $2,500 per eligible student, with up to $1,000 being refundable.

Gathering Necessary Information

To prepare a tax return, an 18-year-old needs to gather essential documents. The Social Security number or Individual Taxpayer Identification Number (ITIN) for themselves and any individuals listed on the return is fundamental for accurate filing. Bank account and routing numbers are also important if direct deposit of a refund or electronic payment of taxes is desired.

Income reporting forms, typically received in January or February, are crucial. A Form W-2 will be issued by each employer, detailing wages earned and taxes withheld. For unearned income, various Form 1099s are provided; for instance, Form 1099-INT reports interest income, and Form 1099-DIV reports dividends. If the 18-year-old engaged in freelance or independent contractor work, they might receive Form 1099-NEC for non-employee compensation. Records for any potential deductions or credits, such as tuition statements (Form 1098-T) for education expenses, should also be collected.

Completing and Submitting a Tax Return

Once all necessary documents and information are collected, an 18-year-old can complete their tax return. Several methods are available for preparing and filing federal income taxes. Many taxpayers opt for tax preparation software, which guides users through the process by asking questions and populating the correct forms.

The IRS also offers free filing options for eligible taxpayers. IRS Free File, a partnership with tax software companies, allows eligible individuals to prepare and e-file federal returns at no cost. For those comfortable with filling out forms directly, IRS Free File Fillable Forms are available regardless of income. Alternatively, a qualified tax professional can prepare and submit the return.

Most taxpayers choose to e-file their returns, which is generally the fastest and most secure method, often resulting in quicker refund processing. After preparing the return, whether through software or a professional, the data is electronically transmitted to the IRS. If e-filing is not preferred, paper forms can be printed and mailed to the IRS, though this method typically involves longer processing times.