In this article, we’re going to covering taxes and teens. We’re looking at this through the lens of the United States of America, however many countries will have similar tax rules so a lot of this information will still be relevant to you, even if the numbers are a bit different.
Taxes can also vary from state to state, as states charge different amounts to their residents in the form of taxes.
Do Teenagers Have to File Taxes?
Yes, teenagers have to file taxes if they meet the criteria. Age isn’t an excuse to not pay taxes if a teenager’s income is high enough.
In America, you’re legally required to file taxes if you earn over $12,550 – that’s the standard deduction for a tax year. If your teen earns less than that, as many teens do, then it’s not required for your teen to file taxes.
A dependent teen is required to file a return if the teen has more than $1,100 in unearned income. If the unearned income is above $2,200 it would be taxed at the parents rate.
Are you familiar with the terms “earned and unearned income”? Don’t worry, I’ll break down some of the details of what teens need to know about filing taxes.
Earned income is the income your teens earn from working. It includes the tips they get, their salary or wages, and all professional fees. Taxable scholarships and fellowship grants are also classified under earned income.
Most teens don’t earn up to $12,550 in a year even with a high paying part time job. That’s because school limits their working hours and most jobs don’t pay enough for them to accumulate that amount in a year. Majority of the teenagers in the US don’t file taxes since they don’t meet the requirements.
Now, unearned income is simply an investment type income. It includes things like:
- All annuities
- Taxable interest
- Capital gains
- Social security benefits
- Unemployment compensation
So, do teens need to file taxes if they have earned income only?
A teen who has only earned income only needs to file taxes if their total earned income plus $400 is up to $12,950. That’s the standard deduction for a dependent child in 2022.
This means your teen can earn up to that amount without paying income tax. If your teen earns over $12,950 it’s legally required for that teen to file taxes.
Should teenagers file taxes if they have unearned income only? The answer is yes if the total is more than $1,150 for 2022. If it’s lesser than that, your teen doesn’t have to file taxes.
A teen that has both earned and unearned income would need to file taxes for 2022 if:
- The earned income is over $12,950
- The unearned income is over $1,150
- Earned income plus unearned income is above $12,550 plus $400
Does My Teenager Need To File Taxes Even If It’s Not Required?
There are instances where your teen needs to file taxes even when they don’t meet the basic standard deduction for the year.
Make sure your teen files a tax return if:
- Income tax was withheld from your teen’s income
- Your teen qualifies for health coverage tax credit, refundable American opportunity education credit, refundable credit for prior year minimum tax, or health coverage tax credit.
Here are a few more tips to help you determine whether or not your teen needs to file taxes:
- A teen earned who earned over $12,550 by doing well in dealing cryptocurrency should file taxes.
- If your teen snagged a well paying summer job for example, take a look at the gross income on their W-2 form to know if they need to file taxes.
- Reading through tax return instructions would help you find out if your child qualifies for any credit.
- If you need more guidance or clarification on taxes, it’ll be good to consult with your family’s tax preparer or another tax professional.
Filing Taxes for Teenagers
Teenagers have to file taxes if their income meets the threshold, but it’s not the end of the world. Avoid common taxation pitfalls and misconceptions. For example, some teens or parents might think it’s a bad idea to earn $13,000 or $14,000 if the cut-off is just below that.
People think that once they cross that line into a higher tax bracket, theyl’l have to pay taxes on their whole income. With a progressive tax system, however, they’re only paying taxes on the amount that exceeds the $12,550 limit.
So, a teen who earns $12,449 shouldn’t stop working to avoid going over $12,550. If a teen earns $13,550, for instance, they’re only paying taxes on the $1,000 that exceeds $12,550.
Taxes for Teens Are Simple
The good news is that filing taxes is usually pretty simple for teens since they typically just have a bit of employment income. It’s not being a teen that makes the taxes simple, it’s just that teenagers usually don’t have a lot of complex income sources, investments, dependents, or other things that can complicate their taxes.
Using a simple tax program usually requires a teen to fill in a few fields and that’s about it – so it’s not a bad idea for teens to learn to file their own taxes. If it’s a more complex tax situation, like if there’s an inheritance, or other income, or other factors beyond a simple part time or full time job, then it’s not a bad idea to speak to a professional, otherwise most teens should be able to file their own taxes with a little bit of help the first time.