[Last updated November 26, 2024]
Taxes are a nonnegotiable aspect of life for most people. You may wonder if you’ll ever be able to stop filing tax returns. Many older adults may continue to pay taxes well into retirement, but not all seniors have to file taxes. Here, we provide information about who must file a federal income tax return. Note that you should always consult a certified public accountant or tax advisor before making tax decisions and to determine if you need to file a state income tax return.
How do I know if I have to file a federal tax return?
Not every American must file taxes. Those whose income is below a certain amount for the year do not have to file. According to the Internal Revenue Service (IRS), the following income thresholds apply to taxpayers:
| Filing status | Age | Minimum income |
| Single | Under 65 | $14,600 |
| Single | 65 or older | $16,550 |
| Head of household | Under 65 | $21,900 |
| Head of household | 65 or older | $23,850 |
| Married filing jointly | Under 65 (both spouses) | $29,200 |
| Married filing jointly | 65 or older (one spouse) | $30,750 |
| Married filing jointly | 65 or older (both spouses) | $32,300 |
| Married filing separately | Any age | $5.00 |
| Qualifying surviving spouse | Under 65 | $29,200 |
| Qualifying surviving spouse | 65 or older | $30,750 |
What retirement account income is taxable?
Any increase in wealth is considered income, including any money you earn or make off investments. Some or all payments you receive from pensions or retirement accounts may be taxable.
For certain retirement plans, you may be responsible for making a partial tax payment on payments you received if you contributed after-tax money to your pension or retirement account. You may be required to pay the full tax obligation on payments from your retirement accounts if you did not make any after-tax contributions, your employer didn’t withhold after-tax contributions from your salary, or you collected all your after-tax contributions tax-free the previous year.
If you are the surviving spouse or a beneficiary of a pension or other retirement account, you may be required to pay income taxes on the payout you receive. In general, most withdrawals of earnings from an inherited Roth IRA account are tax-free. However, withdrawals of earnings may be subject to income tax if the Roth account is less than five years old at the time of the withdrawal.
You should talk with a financial advisor to find out whether you need to pay taxes on retirement account income, depending on the type of accounts you have.
Do I need to pay taxes on life insurance payouts for cash?
The short answer is yes. If you cash out a life insurance policy, the IRS considers it an increase in wealth and adds it to the total amount when determining what you owe in federal income taxes.
You will pay income taxes on the proceeds from the policy that are greater than the cost of the life insurance policy. The taxable income from cashing out a life insurance policy is the amount of money received that is greater than the amount you have paid in premiums during the life of the policy.
Do I have to pay taxes on my Social Security benefits?
Some seniors must pay federal income taxes on their Social Security benefits, depending on their income and filing status. If you have a source of income that is substantially more than what you receive from your Social Security benefits, you will pay federal income taxes on up to 85% of your benefits.
Here are examples of taxpayer obligations for Social Security benefits:
- Single filer: Single taxpayers with a combined income (Social Security benefits and other income) between $25,000 and $34,000 may pay taxes on up to 50% of their benefits. If a single taxpayer makes more than $34,000, then they may pay taxes on up to 85% of their benefits.
- Filing jointly: Taxpayers filing jointly with a combined income of $32,000 to $44,000 may pay taxes on 50% of their benefits. If the spouses have a combined income of more than $44,000, they may be obligated to pay taxes on up to 85% of their benefits.
These income thresholds have remained unchanged for several years, so it’s important to assess your combined income against these limits when planning for potential tax obligations.
Should I file federal income taxes even if I am not required to?
Sometimes filing taxes has benefits even for seniors who are not legally required to file. Some potential benefits of filing taxes when not required include:
- Qualifying for certain income tax credits like the health coverage tax credit, the premium tax credit, and the earned income tax credit, among others.
- Possibly receiving a refund if federal income tax has been withheld from you.
Reasons to file federal income tax returns
Although filing federal income tax returns can be a painful process, there are several reasons to file a return promptly:
- It is the law. It is important to comply with federal law, especially when ensuring your taxes are filed accurately and on time.
- If you do not pay your federal taxes on time, you may have a lien placed on your property, which will make it more difficult to access increased credit and loans in the future.
- Promptly paying your tax obligation can help you avoid future interest and penalties.
Can seniors be claimed as dependents?
An older adult’s child may claim the senior as a dependent on their taxes. Dependents, taxpayers, and the amount of financial support the adult child provides must meet the following federal guidelines:
- The senior’s income for the applicable tax year is below the gross income limit. They cannot make more than the federal income limit of $5,050 for tax year 2024 and still be considered a dependent. This limit applies only to taxable income and does not include nontaxable income, such as most Social Security benefits.
- The taxpayer and the senior must be family or have lived together for at least one year.
- The taxpayer must have provided at least half the senior’s financial support for the year.
What about state income taxes?
Whether you are obligated to pay state income taxes depends on the state where you lived or made money during the tax year. Alaska, Wyoming, Washington, Texas, Tennessee, South Dakota, New Hampshire, Nevada, and Florida do not have state income tax. If you do not live in one of these states, contact a tax professional in your area to learn more about your state income tax obligation.
Though a few requirements apply, it’s worth it to determine whether a senior needs to file federal and state income taxes. Saving money and time is a valuable outcome for any senior who wants to maximize their enjoyment in retirement.
