How Much Money Can You Earn to Claim Exempt on Taxes?

by Mike Parker, Demand Media

    There's always a bunch of paperwork to fill out when you start a new job. One form you don't want to neglect is your W-4. This form tells your employer how much tax you want withheld from your paycheck. If you don't make enough money to create a tax obligation, you can claim exempt, and your employer won't withhold any taxes.

    No Tax Obligation

    The Internal Revenue Service does not state a specific amount of money you can earn and still claim exempt from withholding when you fill out your W-4. The only two factors that determine whether you are eligible to claim exempt is your tax liability from last year and the current year. If you did not have a tax liability last year and don't expect to have a tax liability this year, you can claim exempt.

    Dependent Status

    If you can be claimed as a dependent on another person's tax return, things get a bit more specific. You can't claim exempt if you have more than $300 in unearned income and your total income for the year is more than $950. Unearned income includes everything from interest on your savings account to stock dividends. Just to be clear, you are never considered your spouse's dependent for federal income-tax purposes.

    Considerations

    You do not automatically qualify for exemption from tax withholding just because you are a student or only work part time. The IRS recommends using its tax withholding calculator, available on the IRS.gov website, to determine whether you can expect to have a tax liability and how much you should have withheld to make sure you don't have to pay at the end of the year. Claiming exempt on your W-4 is only good for one tax year. If you expect to be exempt from withholding the next year, you'll need to file a new W-4 by February 15.

    Filing Status

    You can claim exempt on your W-2 even if you are required to file a federal income tax returned based on your gross income. You have to file a federal income tax return if you earn more than the minimum amount allowed by law for your filing status. You have to file a tax return if you are single and your gross income for the year is $9,500 or more. If you are married and file a joint return, you have to file if your combined gross incomes are $19,000 or more. The threshold for filing as head of household is $12,200. If you are a qualifying widow(er), you must file a return if your gross income was $15,300.

    About the Author

    Mike Parker is a full-time writer, publisher and independent businessman. His background includes a career as an investments broker with such NYSE member firms as Edward Jones & Company, AG Edwards & Sons and Dean Witter. He helped launch DiscoverCard as one of the company's first merchant sales reps.