With year’s end approaching, soon it be tax season. Tax season means getting your paperwork and finances in order. While it may not seem exciting, filing taxes can be manageable. An overall understanding of the filing process is a great place to start.
IRS Filing Requirements
If you’re a U.S. citizen, resident, or a resident of Puerto Rico and you meet filing requirements, you are required to file a income tax return.
IRS’ Publication 17 has some factors to check and see if you need to file a tax return.
- Gross Income: All your income including wages, tips, capital gains, tips, gambling winnings, and more should be included on your income tax form.
- Single: $8,950
- Married (filing separately): $3,500
- Married (filing jointly): $17,900
- Head of Household: $11,500
- Qualifying widow(er): $14,400
- Filing Status: The five filing statuses are single, married (filing separately), married (filing jointly) , head of household, and qualifying widow(er) with dependent child. Your filing status have a bearing on the deductions and exemptions you can take.
- Age: If you’re 65 or older, you can have a higher gross income before you’re required to file taxes.
- Single: $10,300
- Married (filing jointly) one spouse 65 & older: $18,950
- Married (filing jointly) both spouses 65 & older: $20,000
- Head of Household: $12,850
- Qualifying widow(er): $15,450
- Dependent: Children are generally reported on their parent(s)’ tax return. Some dependents over 18 may be required to file your taxes.
What exactly is your adjustable gross income?
Something that has many people stressed out with taxes is the terminology. Don’t worry. Your adjustable gross income is basically your entire gross income minus any allowable deductions. Some deductions include:
- Health Savings Account
- Moving Expenses
- Self-employed Health Insurance
- Alimony Paid
- Student Loan Interest
- Tuition and Fees
Your adjustable gross income is not the same as your taxable income.
What’s the difference between your adjusted gross income and taxable income?
After you have calculated your adjusted gross income (line 37 on the 1040), you are then allowed to either take a standard or itemized deduction. It would be wise to compare and see if the standard or itemized deduction is best for you. After you subtract that from your adjusted gross income, you now receive your taxable income amount (line 43 on the 1040).
From your taxable income, you can determine how much tax is due for the year. Later you can see if you underpaid( meaning you owe more tax) or overpaid (you will be receiving a refund).
How are you preparing this tax season?