Do you ever wonder if it's possible to have zero income tax liability? The answer is yes, it is possible. You may not have any tax liability if you don't meet the income requirements to file taxes, or if your total tax was zero on your Form 1040 or 1040-SR. Even if you earned income last year, if it falls below the IRS minimum, you don't have to file a tax return. However, it's still a good idea to file a tax return that shows zero income.
This could be beneficial for several reasons. Generally, you have a tax liability when you earn income or make a profit by selling an investment or other asset. To calculate your state tax liability, find standard deductions and tax information for your state and follow the instructions provided. You can also reduce your tax burden to next to nothing by careful tax planning, even if you have fairly high incomes.
For example, the Smiths enjoy a six-figure gross income but manage to reduce their federal income tax bill to zero by taking advantage of several tax credits and deductions. To determine your tax liability, subtract the standard deduction from your taxable income and consult the appropriate IRS tax categories. If you're sure you'll move to a higher tax bracket after retirement and start accepting withdrawals, a Roth IRA can lower your total tax payments since withdrawals are tax-free. To reduce your tax liability by making a contribution, you need to determine how much you plan to pay taxes in retirement by projecting your income and withdrawals.
With TurboTax, you can be sure that your taxes are done correctly, from simple to complex returns.