Module Overview

Understanding the basics of individual income taxation requires careful attention to three fundamental concepts: filing requirements, filing status, and dependents. These elements serve as the foundation for determining individual tax liability. They influence not only whether a taxpayer is required to file a return, but also how taxable income is calculated and which credits and deductions may be available.

Filing requirements establish the thresholds of income and other conditions that dictate when a return must be submitted to the Internal Revenue Service. Filing status determines the rate structure and standard deduction that apply, reflecting the taxpayer’s marital and family situation. Dependents, meanwhile, play a critical role in shaping eligibility for various deductions and credits, as well as determining certain filing thresholds.

Filing Requirements for Individuals

IRS source – Check if you need to file a tax return

IRS Interactive Tax Assistant: Do I need to file a tax return

Who Must File?

The U.S. federal income tax system is based on the principle of voluntary compliance, but for many individuals, filing a tax return is a legal requirement. Whether a taxpayer is required to file depends primarily on four factors: gross income, filing status, age, and dependency status. These filing thresholds are updated annually for inflation, so taxpayers must check the most current IRS guidelines each year to ensure compliance.

General Filing Thresholds Based on Gross Income

Gross income is the most important factor in determining filing obligations. The Internal Revenue Service (IRS) sets specific income thresholds for each filing status, and if a taxpayer’s gross income meets or exceeds that threshold, a federal income tax return must be filed. These thresholds closely align with the standard deduction for each filing status, providing a baseline measure of when filing becomes mandatory.

Special Situations Requiring a Tax Return

Some taxpayers must file even if their gross income is below the threshold. This occurs when special taxes are owed or when certain circumstances apply. For example, a self‑employed individual with net earnings that meet or exceed the IRS‑published filing threshold for self‑employment income must file a return and pay self‑employment tax, which funds Social Security and Medicare. Other situations requiring a return include owing household employment taxes, owing Alternative Minimum Tax, being subject to recapture provisions, or owing additional taxes on retirement plan distributions. In addition, taxpayers who received advance payments of the Premium Tax Credit to help with health insurance costs must file a return to reconcile those payments with the actual credit amount allowed.

Filing Even When Not Required

In some cases, taxpayers who are not legally required to file may still benefit from doing so. Filing can result in a refund of taxes withheld or the receipt of refundable tax credits. For instance, individuals who had federal income tax withheld from wages may be entitled to a refund if their total tax liability is less than the amount withheld. Refundable credits, such as the Earned Income Tax Credit (EITC), the refundable portion of the Child Tax Credit, and the partially refundable American Opportunity Tax Credit, provide additional incentives for filing even when income is below the required threshold.

Filing Requirements for Dependents

Special rules apply to individuals who can be claimed as dependents on another taxpayer’s return. For dependents, the filing requirement depends on both the type of income and the total income. In general, dependents with unearned income (such as interest, dividends, capital gains, rents, royalties, or certain distributions) face a lower filing threshold because of the “kiddie tax.” Earned income includes wages, salaries, and taxable scholarships. See IRS Publication 501 for more details.

Filing Status

IRS source: Filing status

IRS Interactive Tax Assistant: What is my filing status?

Filing status serves as the foundation for many aspects of the tax return, influencing filing requirements based on income thresholds, the size of the standard deduction, eligibility for certain credits, and the overall tax liability.

Determining Filing Status

Filing status is one of the most important decisions a taxpayer makes when preparing a federal income tax return. It determines the tax rate schedule, the size of the standard deduction, and eligibility for certain tax benefits. Determining the correct filing status requires considering both marital status and family circumstances. Taxpayers should review all the filing statuses for which they may qualify and then select the one that produces the lowest tax liability, as long as eligibility requirements are met.

Categories of Filing Status

The Internal Revenue Code (IRC § 1 and related sections) recognizes five filing statuses: Single, Married Filing Jointly, Married Filing Separately, Head of Household, and Qualifying Surviving Spouse. Each category reflects different family and household situations, and each has distinct implications for tax calculation. The following sections outline the eligibility rules and common applications of each status.

Single Filing Status

Single status applies to individuals who, on the last day of the tax year (December 31), are unmarried, divorced, or legally separated under state law (IRC § 7703). Widowed individuals who do not qualify as a surviving spouse must also file as single. This filing status generally applies to taxpayers who are not married and who do not have dependents.

Married Filing Jointly

Married Filing Jointly is available to couples who are legally married as of December 31 (IRC § 6013). Both spouses agree to file one return together, combining their income, deductions, and credits. This filing status is often the most favorable because it provides a larger standard deduction and wider tax brackets. Couples typically choose this option to simplify filing and maximize available benefits.

Married Filing Separately

Married Filing Separately is available to taxpayers who are legally married at year-end but choose to file separate returns (IRC § 6013). Each spouse reports only their own income, deductions, and credits. Although appropriate in certain circumstances, such as when one spouse prefers not to share liability for the other’s tax, this status often results in a higher combined tax liability. In addition, some credits and deductions are reduced or unavailable when filing separately.

Head of Household

Head of Household status is intended to provide tax relief to certain unmarried taxpayers who maintain a household for dependents (IRC § 2(b)). To qualify, the taxpayer must be considered unmarried for tax purposes and must pay more than half the cost of keeping up a home for a qualifying child or qualifying relative. Eligible household expenses include rent, mortgage, property taxes, utilities, and food consumed in the home. This filing status offers a higher standard deduction and more favorable tax brackets than the Single status, making it especially beneficial for single parents or those supporting dependents.

The abandoned spouse rules allow a married taxpayer to be treated as unmarried for Head of Household purposes if specific conditions are met. Under IRC § 7703(b), a taxpayer qualifies if they lived apart from their spouse for the last six months of the year, file a separate return, paid more than half the cost of maintaining their home, and that home was the main residence for more than half the year of their dependent child, stepchild, or foster child. This provision ensures that taxpayers in situations where a marriage has effectively ended but not yet legally dissolved can still benefit from the more favorable Head of Household filing status rather than being limited to the less advantageous Married Filing Separately status.

Qualifying Surviving Spouse (Qualifying Widow or Widower)

A taxpayer may use the Qualifying Surviving Spouse status for up to two years following the year of a spouse’s death, provided certain conditions are met (IRC § 2(a)). The taxpayer must not have remarried, must have been eligible to file a joint return in the year of the spouse’s death, and must have a dependent child living in the household for whom they provide more than half of the financial support. This filing status allows the surviving spouse to use the same tax rates and standard deduction as Married Filing Jointly, providing temporary financial relief during a difficult period.

Dependents: Qualifying Children and Qualifying Relatives

IRS source: Dependents

IRS Interactive Tax Assistant: whom may I claim as a dependent

The Internal Revenue Code (IRC) provides specific rules for determining who may be claimed as a dependent. A dependent is an individual who meets statutory requirements that allow the taxpayer to qualify for important tax benefits, such as the Child Tax Credit, the Earned Income Tax Credit, and the ability to file as Head of Household. Because dependents influence both filing status and eligibility for credits and deductions. The IRC identifies two categories of dependents: Qualifying Child (QC) and Qualifying Relative (QR).

Qualifying Child (QC)

An individual must meet all six tests outlined in IRC § 152(c) to be considered a Qualifying Child.

• Relationship Test (IRC § 152(c)(2)): The child must be related to the taxpayer. Qualifying relationships include sons, daughters, stepchildren, adopted children, siblings, step-siblings, grandchildren, nieces, nephews, and foster children placed by a court or agency. It is important to note that cousins do not meet the relationship test unless they also satisfy the residency requirement by living with the taxpayer for the full year. Example: a niece supported by and living with a taxpayer may qualify if all other requirements are met.
• Residency Test (IRC § 152(c)(1)(B), § 152(c)(4)): The child must live with the taxpayer for more than half of the year. Temporary absences, such as attending school, serving in the military, or receiving medical care, do not count against this requirement if the child is expected to return home. Example: a student living in a dormitory during the school year is still considered a resident of the parent’s household.
• Age Test (IRC § 152(c)(1)(C), § 152(c)(3)): The child must be under age 19 at year-end, under age 24 if a full-time student, or permanently disabled at any time during the year. Example: a 22-year-old college student supported by parents may qualify, but a 25-year-old sibling generally would not. A child who is permanently disabled qualifies regardless of age.
• Self-Support Test (IRC § 152(c)(1)(D), § 152(c)(5)): The child cannot provide more than half of their own support during the year. Support includes housing, food, education, clothing, and medical expenses. Example: a teenager with part-time earnings who still relies on parents for most living expenses remains a dependent.
• Joint Return Test (IRC § 152(c)(1)(E), § 152(b)(2)): The child cannot file a joint return with a spouse, unless it is filed solely to claim a refund of withheld taxes. Example: a married 19-year-old who files jointly with a spouse for reasons other than a refund cannot be claimed as a dependent.
• Citizenship or Residency Test (IRC § 152(b)(3)): The child must be a U.S. citizen, U.S. national, U.S. resident alien, or a resident of Canada or Mexico. Children who live outside these areas typically do not qualify.

Qualifying Relative (QR)

If an individual is not a Qualifying Child, they may still qualify as a Qualifying Relative under IRC § 152(d). To qualify, the following tests must be satisfied.

• Gross Income Test (IRC § 152(d)(1)(B)): The dependent’s gross income must be less than the exemption amount defined in IRC § 151(d), which is adjusted annually for inflation. Gross income includes wages, business income, interest, and taxable Social Security, but excludes tax-exempt income such as municipal bond interest. Example: an elderly parent with only modest taxable income could qualify.
• Support Test (IRC § 152(d)(1)(C), § 152(d)(3)): The taxpayer must provide more than half of the dependent’s total support for the year. Support encompasses lodging, food, medical care, and other basic living expenses and the rules are the same for both qualifying child and qualifying relative. If an individual provides more than half of their own support, then no taxpayer can be considered to have provided more than half of that support. In other words, an individual who fails the self-support test for a qualifying child also cannot qualify as a qualifying relative. In situations where no single person provides more than half of the support, a Multiple Support Agreement allows one taxpayer to claim the dependent if they contribute at least 10% of the support. Example: three siblings who share responsibility for a parent’s expenses may designate one to claim the parent.
• Relationship or Household Member Test (IRC § 152(d)(2)): The individual must either be related to the taxpayer (e.g., parent, sibling, in-law, aunt, uncle, niece, or nephew) or live with the taxpayer for the entire year as a member of the household. Example: a cousin living with the taxpayer for the full year could qualify if all other tests are met.
• Citizenship or Residency Test (IRC § 152(b)(3)): The individual must be a U.S. citizen, U.S. national, U.S. resident alien, or a resident of Canada or Mexico.

Dependency Determination Framework

A dependent may be claimed by only one taxpayer for a specific tax year. Because of this exclusivity, determining who is entitled to claim a dependent requires a logical sequence of steps that should be applied consistently.

Step One: Apply the Qualifying Child Tests. The first step is to determine whether the individual meets all six statutory requirements to be treated as a Qualifying Child. If the tests are met, the taxpayer has a potential dependency claim. For example, a 15-year-old son who lives with his mother for most of the year, meets the age and relationship rules, and does not provide his own support would qualify.

Tie-Breaker Rules. When more than one taxpayer could claim the same individual as a Qualifying Child, the tie-breaker rules in IRC § 152(c)(4) apply. Priority is first given to a parent if only one is a parent. If both parents qualify, the parent with whom the child lived the longest during the year may claim the dependent. If the child lived with both parents for the same length of time, the parent with the higher adjusted gross income (AGI) prevails. If no parent is eligible, the taxpayer with the highest AGI among all potential claimants is entitled to the claim. These rules provide clarity and prevent multiple taxpayers from claiming the same dependent.

Step Second: Apply the Qualifying Relative Tests. If the individual is not a Qualifying Child of any taxpayer, the tests for Qualifying Relative status are applied. For example, an elderly parent with minimal income who is primarily supported by the taxpayer may qualify under the QR rules.

Multiple Support Agreements. In some families, no single person provides more than half of the dependent’s support. In these cases, IRC § 152(d)(3) permits two or more taxpayers who collectively provide more than half the support to agree that one of them may claim the dependent. The chosen taxpayer must provide at least 10% of the support, and the other contributors must sign a written waiver. For example, three siblings jointly support an elderly parent and agree to allow one sibling to claim the dependency exemption.