25 Feb How much do you have to earn to skip filing a tax return?
Q. Due to a COVID-related job loss in 2021, this could be the first time my income could be low enough that I won’t need to file a New Jersey tax return. Could you explain the rules about this? Would income from capital gains, interest and dividends still be applicable if the combined amount is under the minimum, or does it only apply to wages? Do we have to file a tax return, and would we still be eligible for the Homestead Rebate?
A. We’re sorry to hear about your job loss.
But it could mean some positive news with regards to filing a tax return.
In general, every taxpayer should file an income tax return if they meet the earned income filing threshold for 2021, which is $12,550 for singles and $25,100 for those married filing jointly, said Atiq Ahmed, an Enrolled Agent and owner of Edison Tax Group in Edison.
This is even more important if one didn’t meet the income filing threshold but income taxes were withheld, he said. If that’s the case, you should file and apply for a tax refund.
Most likely, you would receive all the taxes that were withheld, he said.
A federal return must be filed if a taxpayer has unearned income of more than $1,100 from interest, ordinary dividend or capital gains, including capital gain distribution, Ahmed said.
“One thing to note is based on my experience most clients fail or don’t withhold sufficiently from unearned income and end up with a tax liability,” he said.
Now let’s look at New Jersey, for which you must look at the gross income filing threshold.
“This means income before any deductions from everywhere. This includes wages, dividends, interest, capital gains etc.,” Ahmed said. “The New Jersey the filing threshold is met when a single filer has more than $10,000 of income and a married filer has more than $20,000 of income.”
As for the Homestead Rebate, you must report the amount from their New Jersey Gross Income from line 29 of their NJ-1040, Ahmed said. If no return was filed, the filer would simply enter zero as their Gross Income.
There are other requirements the filer needs to meet before qualifying for the Homestead benefit. You can learn more about that here.
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This story was originally published on Feb. 25, 2022.
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