Frequently Asked Questions about taxes

Updated 10/25/2025

• Do I need to file a return?
• What is the standard deduction?
• What is my tax bracket?
• How much can I deduct for mileage?
• How much can I contribute to my retirement plan?
• How much are Social Security earnings limits and benefits?
• How much are the gift and estate tax exemptions?
• How much can I donate for Arizona tax credits?

 These numbers are for reference only. There are a variety of factors affecting how they are applied to a tax return, so consult your Enrolled Agent for specifics of your situation.

Do I need to file a return?

To taxpayers who have faithfully filed tax returns for years, it may be surprising to find that they may not have to file. Generally, you do not need to file a tax return if your income is under the standard deduction.

However...you must file a return if you had self-employment income of $400 or more.

Or, you should file if someone else (like your parents) could claim you as a dependent and you earned over $15,750 or had investment income (interest on savings, stock dividends, etc.) of more than $1,400.

Also, you should file a return even if your income is under these limits if you:

• Had withholding on wages, pensions, retirement distributions or investment accounts.
• Are eligible for an Earned income Credit, Child Tax Credit, education credits or other tax credits.

The federal Form 1040 actually collects several other taxes including:

• Self employment (Social Security and Medicare) tax
• Social Security and Medicare tax on tip income
• Early withdrawal tax on IRA's and retirement plans
• Alternative Minimum Tax & Net Investment Income Tax
• Household employee payroll tax ("nanny tax")

You may be required to file a state return even if you don't have to file a federal one. There are other circumstances where you might be required to file, or it might be beneficial to file, so check with an Enrolled Agent to be sure.

Standard deductions

The IRS excludes from your taxable income a specified amount of expenses, called a "standard deduction." If your actual expenses in the allowed categories total more than the standard deduction amount, you may deduct those actual expenses, which is called "itemizing." If your itemized deductions are less than the standard amount, you are better off to use the standard deduction. * Only if spouse does not itemize; otherwise $0

Age 65 or older Single or HOH gets an additional $2,000 standard deduction ($2,050 for 2026); $1,600 each age 65 for MFJ, MFS or QW ($1,650 for 2026). Arizona has an additional exemption of $2,100 for age 65+.

For 2025 through 2028, taxpayers age 65+ may take an additional $6,000 standard deduction, if their income is below $75,000 (single) or $150,000 (joint). Above those levels the extra standard deduction phases out.

*For taxpayers with AGI less than $75,000 Single/$150,000 MFJ

Tax brackets

Income tax is based on your income after standard or itemized deductions, and other adjustments are subtracted. A tax bracket is the rate at which the top of your income is taxed, but not all of it. Someone in a 22 percent tax bracket has part of their income taxed at 10 percent and part at 12 percent, with only the highest portion at 22 percent. The tax bracket tells you how much you will have to pay in federal income tax on each additional dollar you make. * Net Investment Income (NII) tax of 3.8% is additional for taxable income above $200,000 (single or head of household), $250,000 (married filing jointly) or $125,000 (married filing separately).

Mileage rates

Standard mileage rates may be used as an alternative to deducting actual expenses. The standard mileage rate must be claimed the first year a vehicle is used for deductible purposes; you cannot change to it once you have started claiming actual expenses. To deduct either mileage or actual expenses, you must have a written record for each trip showing: Date, Miles driven, Where to, Business purpose.

Retirement plan limits

Taxpayers age 50 and older may contribute a higher amount to retirement plans to "catch up," regardless of whether or they had contributed the maximum amounts earlier in life. For 401(k) and 403(b) plans, a higher catchup limit is available to those age 60-63.

Estate and gift tax exemption

Your estate will have to pay taxes if its net value when you die is more than the "exempt" amount set by Congress. The exemption amount is reduced by any gifts throughout the lifetime of more than the annual gift tax exclusion limit. The highest tax rate on estates exceeding the exclusion amount is 40%.

The gift exclusion is per donor and per recipient, so a married couple can exclude gifts up to double the amount shown in the chart to a child, for instance. Making a gift of more than the annual exclusion does not trigger immediate taxes, only the need to file a gift tax Form 709.

Contribution limits for Arizona credits

Arizona offers five "dollar-for-dollar" credits -- they take $1 off your Arizona tax for each $1 donated (up to the limits). Taxpayers may give for multiple credits. Unused amounts carry over to future years. For more details, download the AzSEA Tax Credits brochure.