How Much Do I Have to Make to Owe Taxes?
Understand how income, deductions, and tax thresholds determine whether you owe taxes and what factors might impact your tax liability.
Understanding when you owe federal income taxes depends on several factors, including earnings, deductions, and filing status. While some may not need to file a return, others could owe taxes even with relatively low income.
Various IRS thresholds determine filing requirements, but additional factors—such as self-employment income or state tax rules—can also impact tax liability.
Calculating Taxable Income
Taxable income is determined by subtracting adjustments and deductions from total earnings.
Gross Income
Gross income includes wages, salaries, tips, rental income, dividends, and gambling winnings. Some income is partially or fully exempt, such as municipal bond interest and, in certain cases, Social Security benefits. Gifts and life insurance proceeds are also excluded.
Adjustments
Adjustments, or “above-the-line deductions,” reduce taxable income before applying the standard or itemized deductions. These include contributions to a traditional IRA, student loan interest, and educator expenses.
Self-employed individuals can deduct a portion of health insurance premiums. Health savings account (HSA) contributions are also deductible up to IRS limits. These adjustments lower taxable income, potentially reducing taxes owed or increasing a refund.
Deductions
After adjustments, taxpayers can claim either the standard deduction or itemize deductions, such as mortgage interest, medical expenses exceeding 7.5% of adjusted gross income, and charitable donations.
Some deductions have limits. The state and local tax (SALT) deduction is capped at $10,000 for individuals and married couples filing jointly. Taxpayers must compare itemized deductions to the standard deduction to determine which provides greater tax savings.
Federal Filing Thresholds
The IRS sets income thresholds for filing based on status, age, and income type.
For 2024, single filers under 65 must file if gross income exceeds $14,600. Those 65 and older have a threshold of $16,550. Married couples filing jointly must file if their combined income surpasses $29,200, or $30,700 if one spouse is 65 or older, and $32,200 if both are.
Heads of household must file if income exceeds $21,900, or $24,400 if 65 or older. Qualifying widows or widowers with a dependent child follow the same thresholds as married joint filers.
Certain types of income require filing regardless of total earnings. Self-employment income above $400 triggers a filing requirement due to Social Security and Medicare tax obligations. Untaxed retirement account distributions, alternative minimum tax liability, or marketplace health insurance with premium tax credits can also necessitate filing.
Standard Deduction Impact
The standard deduction reduces taxable income, often eliminating tax liability for lower earners. For 2024, it is $14,600 for single filers, $21,900 for heads of household, and $29,200 for married couples filing jointly.
For those near the filing threshold, the standard deduction can eliminate taxable income entirely. A single filer earning $15,000 with no other income would have nearly all taxable income offset, leaving only $400 subject to tax. Given the progressive tax system, this would likely result in little to no tax owed.
The Tax Cuts and Jobs Act (TCJA) of 2017 nearly doubled the standard deduction while limiting certain itemized deductions, reducing the number of taxpayers who itemize.
Self-Employment Income Requirements
Self-employed individuals face additional tax obligations, primarily due to the self-employment tax. Unlike employees, who split payroll taxes with their employer, self-employed individuals pay the full 15.3% tax, which includes 12.4% for Social Security and 2.9% for Medicare. This applies to net earnings above $400.
Since there is no employer withholding taxes from self-employment income, estimated tax payments are required if total tax liability exceeds $1,000 for the year. These payments are due quarterly—April 15, June 15, September 15, and January 15 of the following year. The IRS provides Form 1040-ES to help calculate these payments.
State-Level Obligations
State tax requirements vary widely. Nine states—Alaska, Florida, Nevada, South Dakota, Texas, Tennessee, Washington, Wyoming, and New Hampshire—do not impose a broad-based income tax, though New Hampshire taxes interest and dividend income.
Other states, such as California and New York, have progressive tax systems, meaning even lower-income earners may have to file. Some states have lower filing thresholds than the federal government, requiring a return even if no federal filing is necessary.
Residents working in multiple states or earning out-of-state income may face additional tax liabilities, as some states tax all income earned within their borders regardless of residency.
Other Factors That Can Lead to Owing Taxes
Even if income falls below federal or state filing thresholds, certain circumstances can still result in tax liability.
Under-withholding is a common reason taxpayers owe money. If too little is withheld from paychecks, the IRS may require payment when filing. This often happens when individuals claim too many allowances on Form W-4 or have multiple income sources without adjusting withholding.
Unemployment benefits are another overlooked source of taxable income. Many recipients do not have taxes withheld, leading to a balance due at tax time.