There is a common misconception that once an individual reaches the age of 65 that they are no longer required to file an income tax return. On the contrary, regardless of age, an individual is required to file a tax return if their taxable income exceeds the standard deduction. However, keep in mind that the keyword here is “taxable.” If the individual’s income consists only of non-taxable sources, then you are not required to file an income tax return.
For instance, if an individual’s only source of income is social security, then that person is not required to file an income tax return. Social Security benefits are generally nontaxable. On the other hand, a portion of social security benefits can become taxable if those benefits are coupled with other sources of taxable income (i.e. private pensions, required minimum distributions, etc.)The following chart displays the percentage of social security benefits that are taxed once a taxpayer reaches certain levels of income:
**** All numbers based on combined income which is AGI + nontaxable interest + ½ of Social Security Benefits.****
Other Sources of Nontaxable Income
There are a few other types of nontaxable income. These income sources include: Certain disability insurance payments; gifts; and life insurance proceeds. If these types are income is the taxpayer’s sole source of income, then a return is not required. However, if the taxpayer receives additional sources of taxable income, then the tax return will be filed without the nontaxable income.