If You Make $12,000 a Year, How Much Is Taxed?
While you may not owe federal income tax on a $12,000 salary, other taxes still apply. Learn how your total tax liability is calculated based on key factors.
The tax on a $12,000 annual income depends on your filing status, where you live, and the different types of taxes. Your total tax obligation is a combination of federal income tax, payroll taxes for Social Security and Medicare, and any applicable state or local taxes. Each of these has its own set of rules and rates that influence how much you will ultimately pay.
Understanding Your Federal Income Tax Liability
Federal income tax begins with your gross income, which is $12,000 in this scenario. From this amount, you can subtract deductions to arrive at your taxable income. The most common is the standard deduction, a fixed-dollar amount the Internal Revenue Service (IRS) allows taxpayers to subtract from their income. For the 2024 tax year, the standard deduction for a single individual is $14,600.
Because the $14,600 standard deduction is greater than the $12,000 gross income, a single filer would have a taxable income of $0, meaning you would owe no federal income tax. The same outcome applies to other common filing statuses, as their standard deductions are higher. For 2024, the standard deduction for those Married Filing Jointly is $29,200, and for a Head of Household, it is $21,900.
Even with no federal income tax liability, you could be eligible for a refund from the government through refundable tax credits, which are paid out even if you owe no tax. The Earned Income Tax Credit (EITC) is a credit for individuals with low-to-moderate income. For the 2024 tax year, a single filer with no children could be eligible for the EITC if their earned income is below $18,591.
The EITC is designed to supplement wages, and for an individual with $12,000 of income and no qualifying children, the credit could result in a payment from the IRS. The maximum credit for a filer with no children in 2024 is $632. This makes it advantageous to explore your eligibility for such credits, as they can provide a financial benefit.
Calculating FICA Taxes
Separate from federal income tax, nearly all wage earners must pay Federal Insurance Contributions Act (FICA) taxes. These taxes fund Social Security and Medicare and are calculated directly from your gross wages, without influence from the standard deduction. FICA taxes are a flat percentage taken from every paycheck, and your employer contributes an equal amount.
The FICA tax is composed of two parts: The Social Security tax rate for employees is 6.2%, and the Medicare tax rate is 1.45%, for a combined rate of 7.65%. For an annual income of $12,000, the total FICA tax would be $918. This amount is withheld by your employer throughout the year.
The Social Security portion of the tax only applies up to an annual income limit, which is $168,600 for 2024. Since a $12,000 income is below this threshold, the full amount is subject to the tax. There is no income limit for the Medicare tax. If you were self-employed, you would be responsible for both the employee and employer portions, for a self-employment tax rate of 15.3% on your net earnings.
State and Local Income Tax Considerations
In addition to federal taxes, you may be subject to state and local income taxes, which operate under different rules. The tax systems vary significantly across the country. It is important to understand the specific regulations where you reside to determine if you owe additional tax on your $12,000 income.
States fall into one of three categories regarding income tax. Some states have no personal income tax at all. Other states impose a flat tax, where a single tax rate is applied to all income levels. The third group uses a progressive tax system, where the tax rate increases as income rises.
Each state that levies an income tax has its own rules for deductions, exemptions, and credits. Some states have their own standard deduction amounts that could reduce or eliminate your state tax liability on a $12,000 income. To determine your specific obligation, you must consult the tax laws of your particular state and locality.
Determining Your Tax Filing Requirement
The IRS establishes gross income thresholds to determine if you are required to file a federal tax return, based on your filing status, age, and gross income. For the 2024 tax year, a single individual under age 65 is required to file if their gross income is $14,600 or more. Since an annual income of $12,000 is below this amount, you are not obligated to file a federal return.
The filing thresholds align with the standard deduction amounts for most common statuses. An exception exists for those who are married but file separately; in that case, the filing threshold is just $5 of gross income.
Even if you are not required to file, it is often beneficial to do so. One reason is to receive a refund of any federal income tax that was withheld from your paychecks. Filing a return is also the only way to claim refundable tax credits you may be eligible for, such as the EITC.