January 20, 2026
Why File a Tax Return When Not Required? Unlocking Potential Benefits
Article Highlights:
- Filing Thresholds
- Tax Withholding
- Earned Income Tax Credit
- Child Tax Credit
- American Opportunity Tax Credit
- Premium Tax Credit
- Carryover Deductions
Generally, individuals are required to file a tax return for a year if their income exceeds the standard deduction for their filing status for that year. But even if they are not required to file, it may be beneficial to do so. They could be missing out on huge refundable tax credits and carryovers of tax benefits.
The following are the income thresholds for filing a return for the 2025 tax year, which is filed in 2026:
|
2025 INDIVIDUAL INCOME TAX RETURN FILING THRESHOLDS |
||
|
FILING STATUS |
UNDER AGE 65 |
AGE 65 OR OLDER |
|
Single |
$15,750 |
$17,750 |
|
Head of Household |
$23,625 |
$25,625 |
|
Married, Filing Jointly |
$31,500 (if both spouses are under 65) |
$33,100 (if one spouse is 65+) |
|
Married, Filing Separately |
$5 (any age) |
$5 (any age) |
|
Qualifying Surviving Spouse |
$31,500 |
$33,100 |
Other Filing Requirements - You may still need to file a federal return even if your income is below the standard threshold. This can occur if:
- You had net earnings from self-employment of $400 or more.
- You owe special taxes, such as the Alternative Minimum Tax.
- You received advance payments of the Premium Tax Credit for health insurance bought from a federal or state marketplace.
- You had income from a church or religious organization of $108.28 or more.
- You have uncollected Social Security or Medicare taxes.
- You owe household employment taxes.
- You (or your spouse if married) took a distribution from a Health Savings Account (HSA).
Filing Requirements for Dependents - If claimed as a dependent by another taxpayer, the filing requirements are different and the dependent must file if he or she had:
- Unearned income (e.g., interest, dividends) more than $1,350.
- Earned income (e.g., wages, tips) more than $15,750.
- Gross income more than the larger of $1,350 or earned income plus $450 (up to the standard deduction).
What Might Be Left on the Table by Not Filing: Just because someone is not required to file a return does not mean they shouldn’t. Failing to file a return could end up leaving large sums of money on the table. Here are some examples.
- Tax Withholding – Most individuals who have wage income also have federal income tax withheld on their earnings. That withheld tax would be 100% refundable if the worker isn’t required to file a return.
A tax credit is a dollar-for-dollar offset against the tax liability. Some credits can only reduce a tax liability to zero, while others as discussed below are refundable, meaning if the credit is more than the individual’s tax any excess credit is refundable. So, if an individual is not required to file and therefore owes no tax and qualifies for one or more refundable credits, it may be in their best interest to file and take advantage of the refundable credit(s). - Earned Income Tax Credit (EITC) – The EITC is for people who work but have lower incomes. It is designed to assist low- to moderate-income workers and can provide substantial refunds. Eligibility depends on income, filing status, and number of qualifying children, if any.If you qualify, it could be worth up to $8,046 in 2025. The credit is a fully refundable credit, so individuals can receive the full amount of the credit even if they do not owe any taxes.
- Child Tax Credit (CTC) - This is a per child credit, allowed to taxpayers with a child or children under the age of 17, that phases out for higher income taxpayers but is available to all categories of taxpayers that are not required to file. The full credit is $2,200 per qualifying child, but the refundable amount is limited to a maximum amount of $1,700.
- American Opportunity Tax Credit (AOTC) – The AOTC provides a credit of up to $2,500 per year per eligible student with higher education expenses. Up to 40% of the AOTC is refundable, even when there is no tax liability. Thus, it can result in a refund of as much as $1,000 (40% of $2,500).
Generally, an eligible student for the AOTC can be the filer and spouse and their dependents that are enrolled at an eligible educational institution for at least one academic period (semester, trimester, quarter) during the year.
If someone other than the filer, a spouse or their claimed dependent (for example, a grandparent) directly makes a payment to an eligible educational institution for a student’s qualified tuition and related expenses, then the filer is treated as paying the expenses and qualifies for the credit. - Premium Tax Credit - Intended to make health insurance more affordable, this credit can lower the cost of premiums for those purchasing health insurance through the Health Insurance Marketplace.
- Net Operating Losses (NOLs): If there was a business loss in a prior year it might have generated a business NOL carryforward that can generally be carried forward 20 years.
- Charitable Contributions: Donations exceeding the limit in one year can be carried forward for up to five years. Filing ensures these contributions aren't wasted and can offset income in more profitable years.
- Passive Activity Losses: Losses from rental properties or other passive activities can sometimes be carried forward to offset future passive income.
- Capital Losses: If your capital losses exceed your capital gains, filing allows you to carry over the excess (up to the allowable limit) to future tax years, offsetting future gains or ordinary income.
Other Considerations
- Eligibility for State Programs: Filing federal taxes often affects state taxes and eligibility for state-based benefits or programs.
- Future Financial Planning: Creating a consistent record of filed returns supports future financial endeavors, such as securing loans, mortgages, or financial aid.
- Identity Protection: Filed returns can prevent fraudulent claims under your name, ensuring that your tax identity remains secure.
Thus, even if not required to file, individuals could still have a refund in the thousands of dollars. The IRS has indicated that about 25% of those eligible for the EITC fail to claim it. Individuals should not miss out on the refundable credits simply because they are not required to file. If you are not required to file, contact this office to see if you can benefit by filing and for assistance in preparing the return. If you didn’t file in prior years, you may have refunds for those years as well.
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