I know what you’re thinking, “it’s my birthday I don’t want to be thinking about taxes.” However, whether we like it or not, getting older can have major impacts on our tax liability. The tax code can be difficult to understand with varying rules and regulations, but how can getting older impact your taxes? This blog post summarizes common tax rules that are subject to age test and can have a direct impact on your tax liability.
I Was Born Yesterday
Welcome to the world!! Your parents are now eligible for the child tax credit of up to $1,000 which directly reduces their tax liability. This means more toys for you! Additionally, your parents can claim you as a dependent and deduct up to $4,050 from their income. That should cover about a month of diapers and baby formula!! Yay parenting!! And if your parents pay for daycare then they are eligible for the child and dependent tax credit. The total expenses that you may use to calculate the credit can be up to $3,000 (for one qualifying individual) or $6,000 (for two or more qualifying individuals).
I’m 13!! Finally A Teenager
Congrats! You’re a strong independent teenager and you don’t need no babysitter; and the IRS would agree with you. Once you are 13 your parents will no longer be eligible to claim the child and dependent care credit.
14 Is The New 21
Congrats you’re 14! As a general rule, the FLSA considers 14 years of age as the minimum age for employment in the US. This means you can get that summer job you’ve always wanted. You will make $10 an hour and work 10 hours a week; that’s a whole $100 a week! But wait just one second. Now that you have a job, assuming you are not working “off the books”, you will be subject to federal withholding taxes, FICA taxes, state withholding tax and any other state or local tax depending on where you live.
I’m 17, You Can’t Treat Me Like A Child Anymore, I’m Grown!
You’re 17 and you’ve reach adulthood. Well according to the IRS you have. At the age of 17 your parents will no longer be able to claim the child tax credit. This means your parents will lose up to $1,000 in tax benefits. Not only has their child grown up but they also lost their child tax credit; sorry mom!
19 going on 21!!!
Congrats! you’re 19 and your mom tells you to get a job or go to college. If you’re not a full time student then your mom won’t be able to take you as a child dependent. So that’s why mom has been pushing me to pick any college.
21 (The Only Birthday That Counts)
I couldn’t skip 21 right? You’re able to buy alcohol and therefore will have to pay sales tax. I know, that’s a bit of a reach for this blog post but I had to do it.
24!! Make It Stop
Let’s be honest, you’re old but at least you’re not 23 (nobody likes you when you’re 23). Full time student or not your parents can no longer claim you as a child dependent. But good news for you! If your parents don’t claim you on their return then you can finally claim yourself.
59 And 1/2 Going On 21
You made it!! You can finally retire and pull from your 401k without worrying about the 10% penalty. Taxpayers under the age of 59 and a half will generally be subject to the 10% penalty from early withdrawal of a qualified retirement plan.
62 (These Age Jokes Are Getting Old)
You’ve made it to 62! This is the earliest age you can take social security. But are your social security benefits taxable? The answer is maybe. Social security benefits are taxed based on income and the amount that will be subject to tax can be as high as 85%. But if your only source of retirement income is social security benefits then chances are you will not pay any federal taxes.
70 and 1/2 (Seriously Can I Stop Paying Taxes?)
If you reach the age of 70 and 1/2 you may be subject to Required Minimum Distributions (RMDs) from your retirement account. Retirement plan participants and IRA owners, including owners of SEP IRAs and SIMPLE IRAs, are responsible for taking the correct amount of RMDs on time every year from their accounts, and they face stiff penalties for failure to take RMDs.
Once you reach the age of 120 you will no longer have to pay any tax and won’t be arrested for small crimes like shoplifting. I mean if you can steal something at 120 and manage to make it out of the store you should be able to keep what you steal. This is totally made up but assuming you reach 120 I’m sure no judge is going to put you in jail for not paying taxes or stealing beer from the gas station; but please consult your CPA before engaging in such activities.