Tax Basics for Teens: Filing Your First Tax Return

Are you filing your taxes for the first time this year? Filing an income tax return may sound daunting, but the good news is that most teen tax returns are simple to do — you just need to familiarize yourself with some tax basics.

A happy woman in a white shirt looks at her laptop while sitting at her kitchen table.

Is a teenager required to file taxes?

As a taxpayer, you don’t need to file a tax return if you earned less than the standard deduction ($12,950 in 2022). However, if the government owes you a tax refund, you will want to file a tax return to get that money back.

If you earned more than $400 by working a job such as babysitting or doing yard work in your neighborhood, like mowing lawns or raking leaves, the IRS considers you to be self-employed, regardless of your age. Because of these filing requirements, you will need to file a tax return to report that taxable income.

Another exception to the standard deduction limit is if you earned more than $1,150 in unearned income (typically from investments or interest rather than a job). If, for example, you invested in crypto or traded stocks as a minor, you may be required to file a tax return even if you made less than the standard deduction.

What is the tax rate for a teenager?

The rate you are taxed depends on how much money you earn throughout the year. Your annual income determines which income tax bracket(s) you are in. Here are the tax brackets for 2022:

Tax rate Single filer Joint filers Married filing separately Head of household
10% $0 to $10,275 $0 to $20,550 $0 to $10,275 $0 to $14,650
12% $10,276 to $41,775 $20,551 to $83,550 $10,276 to $41,775 $14,651 to $55,900
22% $41,776 to $89,075 $83,551 to $178,150 $41,776 to $89,075 $55,901 to $89,050
24% $89,076 to $170,050 $178,151 to $340,100 $89,076 to $170,050 $89,051 to $170,050
32% $170,051 to $215,950 $340,101 to $431,900 $170,051 to $215,950 $170,051 to $215,950
35% $215,951 to $539,900 $431,901 to $647,850 $215,951 to $323,925 $215,951 to $539,900
37% $539,901 or more $647,851 or more $323,926 or more $539,901 or more

For example, let’s say you earned $15,000 as a single filer in 2022. The first $10,275 you made would be taxed at 10 percent, and the remaining $4,725 would be taxed at 12 percent.

What kinds of taxes do teenagers have to pay?

As an employee, you’ll need to pay federal income tax. If you live in a state with income tax, you’ll need to pay state income taxes as well, which means filing a state tax return in addition to a federal tax return.

Luckily, if you e-file with TaxAct®, we can pull information from your federal return to partially fill out your state return, making the process quicker and easier than filing both returns from scratch. Depending on where you live, you could owe local taxes to your city or county as well.

You’ll also need to pay FICA tax, sometimes called the payroll tax. This includes your Social Security and Medicare taxes. If you are a W-2 employee, your employer will pay for half of your FICA tax, making your Social Security tax rate 6.2 percent and your Medicare tax rate 1.45 percent.

What’s the difference between net income and gross income?

If you’re an employee, the government automatically takes the taxes you owe out of each paycheck. They call this withholding. Due to withholding, your take-home pay is the amount of money you earned minus taxes — also referred to as your net income. The amount you earned before taxes were taken out is called your gross income.

How do I file my taxes for the first time?

To start filing your first tax return, you’re going to need a few bits of information:

  • Your full legal name and birthday
  • Your tax identification number (TIN) – this is typically your Social Security number
  • Your tax filing status – most likely single, unless you are married. If you’re unsure about you’re filing status, our software can help you decide which option is best for you.
  • Your Form W-2 from your employer if you’re an employee
  • Your dependency status (we’ll go over this in a moment)
  • A free TaxAct account if you’re filing with us

Why should I file my first return with TaxAct?

You have many options for e-filing online these days — so why should you choose TaxAct?

We strive to provide our customers competitive pricing to help you file for less. Another perk we’re offering all customers this year is free Xpert Assist1. This feature allows you to connect with one of our tax experts for free if you get stuck or have a question while filing. You can also ask a tax expert to help you do a quick review to make sure all looks good before submitting your return.

What are some tax benefits for teens?

As we said before, filing a tax return could mean getting a tax refund of any excess taxes that were withheld from your paycheck. So even if you made less than the standard deduction in 2022, it’s still a good idea to file!

Many tax breaks depend on your dependency status. If you rely on your parents or guardian for more than half of your financial support, you could be considered a dependent if you are under age 19 or under age 24 if you are a full-time student.

If you can be claimed as a dependent on someone else’s tax return, certain tax credits you might qualify for could instead be passed on to whoever is claiming you as a dependent.

One potential tax break for teen students is the student loan interest deduction. If you took out student loans for yourself, you could take a deduction for the interest you paid on those loan(s) — up to $2,500 per year. You can take this deduction even if you don’t itemize your deductions.

At what age can a teen claim a student tax credit?

If you are an undergraduate student at a college or university, you can claim the American Opportunity Tax Credit (AOTC) or Lifetime Learning Credit (LLC), so long as you are paying for your schooling and your parents can’t claim you as a dependent.

The AOTC is a credit available for four years to undergraduate students enrolled at least half-time in an undergraduate program. The LLC is available for anyone taking higher education classes enrolled in at least one course.

You can’t claim both of these credits on the same tax return. If you qualify for both, it’s generally more valuable to claim the AOTC — this tax credit covers more qualified expenses and is partially refundable, unlike the LLC.

Both tax credits are available to whoever pays for the schooling, student or parent, and students can’t claim these credits if they are dependents.

What are the consequences of not filing taxes?

Not filing your taxes can mean missing out on a tax refund at best and facing failure to pay penalties at worst.

Even if you don’t technically need to file (for instance, you made less than the standard deduction), it’s a good idea to do so anyway to make sure you aren’t leaving any money on the table.

Individual tax returns are due by April 18, 2023, this year. Be sure to file by the deadline to avoid a delayed refund or any potential failure to pay penalties if you owe taxes!

Main takeaways

Filing taxes for the first time doesn’t need to be a stressful experience. With some basic knowledge and a step-by-step tax prep guide like TaxAct at your fingertips, you’ll be ready to file with confidence this tax season. You can even file your basic federal tax return for free.

 

This article is for informational purposes only and not legal or financial advice.
All TaxAct offers, products and services are subject to applicable terms and conditions.
1Xpert Assist is available as an added service to users of TaxAct’s online consumer 1040 product. Unlimited access refers to an unlimited quantity of expert contacts available to each customer. Service hours limited to designated scheduling times and by expert availability. Some tax topics or situations may not be included as part of this service. Review of customer return is broad, does not extend to source documents and is not intended to be comprehensive; expert is available to address specific questions raised by customer. Offer for Free TaxAct® Xpert Assist may expire at any time. View full TaxAct Xpert Assist Terms and Conditions.

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