How Old Do I Have to Be to Pay Taxes?

Federal tax obligations in the United States are not determined by age, but by the amount and type of income earned. Even young individuals can have a tax filing requirement if their income surpasses specific thresholds set by the Internal Revenue Service (IRS). The determining factor is the income level, not age.

Understanding Taxable Income for Young People

Income for young people, like all taxpayers, generally falls into two primary categories: earned income and unearned income. Earned income is money received from working, such as wages, salaries, tips, or income from self-employment.

Unearned income, conversely, is money derived from sources other than employment or active work. Common examples include interest from savings accounts, dividends from investments, capital gains from selling assets like stocks, rental income, or distributions from trusts. Both types of income count towards determining if a tax filing requirement exists.

When a Young Person Must File a Tax Return

A young person must file a federal income tax return if their income exceeds specific IRS thresholds, especially if they can be claimed as a dependent on another person’s tax return. For the 2024 tax year, a dependent with only earned income must file if their income is more than $14,600.

If a dependent has only unearned income, they must file a tax return if their unearned income exceeds $1,300 for the 2024 tax year. If a young person has a combination of both earned and unearned income, they generally must file if their gross income is more than the larger of $1,300, or their earned income plus $450. Even if not required to file, filing a return may be beneficial to claim a refund of any federal income tax withheld from their paychecks.

Special Tax Rules for Children’s Investment Income

Special tax rules, often referred to as the “kiddie tax,” apply to a child’s unearned income to prevent high-income individuals from avoiding taxes by transferring income-producing assets to their children. This rule applies to unearned income, such as interest, dividends, and capital gains, above a certain amount. For the 2024 tax year, the first $1,300 of a child’s unearned income is generally tax-free. The next $1,300 is taxed at the child’s own tax rate.

Any unearned income exceeding $2,600 for the 2024 tax year is subject to the kiddie tax and is taxed at the parents’ marginal tax rate. The kiddie tax rules typically apply to children under age 18, or those aged 18 to 23 who are full-time students and do not provide more than half of their own support.

How a Young Person’s Tax Return is Filed

Typically, a parent or legal guardian files a tax return on behalf of a minor child, though the minor can also file their own return. To prepare the return, essential documents include Form W-2, which reports wages and taxes withheld from employment, and various Form 1099s for unearned income. For instance, Form 1099-INT reports interest income received from banks or other financial institutions, while Form 1099-DIV reports dividends and capital gain distributions from investments.

The primary form used for individual income tax returns is Form 1040. If the kiddie tax rules apply due to substantial unearned income, Form 8615, “Tax for Certain Children Who Have Unearned Income,” must be completed and attached to the child’s Form 1040. The general process involves gathering all income statements, calculating total income and any applicable deductions, accurately completing the required forms, and then submitting the return either electronically or by mail to the IRS.