Need to Know Tax › Deductions, credits, and gains
Deductions, credits, and gains
Do you even need to file?
The income lines by filing status and age, the much lower lines for dependents and teens with summer jobs, when you must file anyway, and why filing often pays even when it is not required.
Every year people file returns they did not have to, and, more expensively, skip returns that would have sent money back. The rule itself is simple. You must file a federal return when your gross income reaches a line set by your filing status and age, and that line is the standard deduction. Gross income means everything you took in before any deductions: wages, interest, dividends, pensions, IRA withdrawals, rent, business receipts and the taxable part of Social Security.
| Filing status | Under 65 | 65 or older |
|---|---|---|
| Single | $16,100 | $18,150 |
| Head of household | $24,150 | $26,200 |
| Married filing jointly | $32,200 | $33,850 (one 65+) / $35,500 (both) |
| Qualifying surviving spouse | $32,200 | $33,850 |
| Married filing separately | $5 | $5 |
The 65-and-over lines are the standard deduction plus the age add-on, $2,050 for a single filer and $1,650 per spouse (verify). The $6,000 senior deduction does not raise them. Married filing separately really is $5.
Seniors living on Social Security
Social Security usually does not count toward the line, because for most retirees living mainly on it, none of it is taxable. It becomes partly taxable only when provisional income, meaning other income plus tax-exempt interest plus half the benefits, passes $25,000 for a single person or $32,000 for a couple. The quick test: add half your Social Security to everything else. Under those lines, Social Security is not gross income and the question is whether the rest reaches the filing line.
Worked example: Ruth, 72, single, three versions of the year
| Social Security and pension only | Plus a $12,000 IRA withdrawal | Plus a part-time job instead | |
|---|---|---|---|
| Social Security | $24,000 | $24,000 | $24,000 |
| Other income | $10,000 pension | $22,000 | $10,000 pension + $7,000 wages |
| Provisional income (other + half of SS) | $22,000 | $34,000 | $29,000 |
| Taxable Social Security | $0 | $4,500 | $2,000 |
| Gross income for the filing test | $10,000 | $26,500 | $19,000 |
| Must file? (line is $18,150) | No | Yes | Yes |
| Should file anyway? | Only if tax was withheld from the pension | — | —; and the job’s withholding likely comes back |
Same pension, same Social Security; one IRA withdrawal moves Ruth from not required to required, and makes $4,500 of her benefit taxable on the way. Her tax in the middle column is small, roughly $235 after the age add-on and the senior deduction, but a return is due.
You must file anyway if
You had $400 or more of net profit from self-employment, no matter how small your other income. Self-employment tax is owed from the first dollar of profit. This catches a lot of teenagers.
You had Marketplace health insurance with premium help. The advance credit has to be reconciled on Form 8962 every year, and skipping it cuts off next year’s help. For 2026 there is no cap on paying back excess help.
You took money out of a health savings account, even if it all went to medical bills; Form 8889 has to say so. You owe a special tax: the 10% penalty on an early IRA withdrawal, household employment taxes for a nanny, or the alternative minimum tax. Church employees with $108.28 or more of wages from a church that has opted out of Social Security. And a year you were required to file and did not does not go away.
Dependents and teenagers
The lines for someone who can be claimed as a dependent are much lower. For 2026 a single dependent under 65 must file with more than $1,350 of investment income, more than $16,100 of wages, gross income over the larger of $1,350 or earned income (up to $15,650) plus $450 when they have both, or $400 of self-employment profit.
Worked example: three teenagers
| Maya, 17, lifeguard | Ethan, 15, lawn business | Ava, 12, custodial account | |
|---|---|---|---|
| Income | $6,000 wages, $300 withheld, $40 interest | $2,200 mowing, $300 of gas: $1,900 profit | $3,000 of dividends |
| Must file? | No: under $16,100 earned and $1,350 unearned | Yes: over $400 of self-employment profit | Yes: over $1,350 of unearned income |
| What happens | Should file anyway: the $300 comes back | Owes about $270 of self-employment tax; starts her Social Security record; can put up to $1,750 into a Roth IRA | Part of the dividends is taxed at her parents’ rate under the kiddie tax |
The lawn-mowing teen with $1,900 owes tax and must file; the grocery-store teen with $6,000 owes nothing and need not. A dependent who files must check the box that someone can claim them, or the parents’ e-filed return is rejected.
Why you should file anyway
Not having to file is not the same as not wanting to. File to get withheld tax back: a part-time job with $600 withheld is a $600 refund waiting for a return. File for the refundable credits, which pay out even when no tax is owed: the earned income credit, up to $8,231 for 2026, and the refundable part of the child tax credit can be worth thousands to a working family under the filing line, and Colorado’s family credits are refundable too. File to start the clock: the IRS generally has three years from the date you file to audit a return; if you never file, that clock never starts. And do not wait: a refund that is not claimed within three years of the due date is lost for good.
Behind the scenes
Before telling a retiree they do not need to file, a preparer pulls the IRS wage and income transcript for the year. It lists every W-2, 1099 and 1098 the IRS received in that person’s name, including the brokerage account they forgot, the pension that withheld tax, and the small IRA distribution that pushed them over the line. The decision not to file is made from the IRS’s list, not from the envelopes that happened to arrive. The transcript is free, takes a day to come through an online account, and settles the question for good.
The Colorado side
A full-year Colorado resident generally must file a Colorado return if required to file a federal return, or if any Colorado income tax is owed (verify filing threshold). Part-year residents and nonresidents with Colorado income may need to file as well. Colorado’s family credits and earned income credit match are refundable, so filing can pay even with no tax due, and in surplus years the TABOR refund goes only to people who file; there is no TABOR refund for 2026. For low-income seniors, the PTC rebate for property tax, rent and heat is a separate application, Form DR 0104PTC, and does not require an income tax return.
What to bring your preparer
- Every form that arrived: W-2s, 1099s of every kind, SSA-1099, 1095-A, 1099-SA
- A note of any income with no form: cash work, a side business, rent from a roommate
- For a retiree: the SSA-1099 and every 1099-R, so the quick test can be run
- For a dependent: who claims them, and both earned and unearned income separately
- If you are unsure what the IRS has: your IRS Online Account login, or authorization to pull a transcript
- Prior years you may have skipped, so the three-year refund window can be checked
Questions people ask
I only made $3,000 this year. Do I need to file?
Probably not, unless it was self-employment income of $400 or more, you had Marketplace insurance with premium help, or you owe another special tax. If any tax was withheld, or you qualify for the earned income credit, file to get the money.
My teenager made $8,000 at a summer job. Does she need to file?
Not required, since it is under $16,100 of earned income, but she should: the withholding comes back. She checks the box that she can be claimed by someone else.
My wife and I are both 70 and live on Social Security and a small pension. Do we file?
Run the quick test: half your Social Security plus the pension and any interest. Under $32,000, the Social Security is not gross income, and if the pension and interest are under $35,500 you are not required to file. If the pension withholds tax, file to get it back.
I didn’t file for 2023 and I think I was owed a refund. Is it too late?
A 2023 return was due April 15, 2024, so the refund can be claimed until April 15, 2027. After that it is forfeited. File it now.
Does filing a return make me more likely to be audited?
No. Not filing when required is what draws attention, and it leaves the audit window open forever. A filed return closes it after three years.
Not having to file is not the same as not wanting to
Withheld tax and the refundable credits come back only on a filed return, and a refund not claimed within three years of the due date is gone. When in doubt, file; a simple return costs little and starts the clock.