You won't know what to expect tax-wise from your summer job unless you consider factors other than how much you earn.
The article below is accurate for your 2017 taxes, the one that you file this year by the April 2018 deadline, including a few retroactive changes due to the passing of tax reform. Some tax information below will change next year for your 2018 taxes, but won’t impact you this year. Learn more about tax reform here.
Maybe you’re a student who only works during the summer, or a teacher who prefers to keep busy with a second job when school isn’t in session. Regardless of your reason, you won’t know what to expect tax-wise from your summer job unless you consider factors other than how much you earn.
Summer employment income
Most taxpayers can earn a certain amount of income each year without having to pay taxes or file a return. However, if you must file a tax return, any income, regardless of when you earn it, must be reported. This means you must report all employment earnings, including those reported on a W-2 by your summer employer.
Should you file?
When no one else can claim you as a dependent, you can figure out whether filing a tax return is necessary by comparing the total income you earn from your summer job (and all other jobs) to the sum of the standard deduction you can take for the filing status you use plus one personal exemption. If your income is less than this sum, you do not need to file a tax return. This also means you won’t owe any tax on your summer job earnings. Check the IRS website for the latest figures to do this calculation.
Student dependent issues
If you are a full-time student for most of the year, you may find you won't need to file a return if you work just two or three months of summer. However, if you’re eligible to receive a refund of any taxes withheld from your paychecks, you will want to file anyway to get that money back.
The ordinary filing thresholds do not apply to you if you’re still claimed as a dependent on your parents’ tax return. In this case, you will need to file a tax return if your total earnings are greater than the standard deduction available to single filers (without any increase for a personal exemption). These dependent filing rules only apply to your earned income. You will also need to file if you received unearned income in excess of $950, regardless of any other earnings. Unearned income covers non-employment income such as interest and dividends.
Other ways to lower your tax bill
Regardless of the rules you follow to determine your filing obligations, there are ways to reduce your taxable income—the final amount you calculate tax on—other than taking the standard deduction and personal exemptions. Several credits and deductions can reduce your tax bill, some of which are available for the expenses you incur as a student. If itemizing saves you more in tax than the standard deduction, filing a Schedule A with your return can further reduce your taxes.
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