This article is posted with permission from our partner TaxAct. File your freelance taxes with confidence using TaxAct’s easy-to-use tax software. Freelancers Union members get 25% off the cost of federal and state tax filing: https://bit.ly/freelancers_taxact_blog

A summer job is a great way to add extra money to your bank account. Whether you’re a seasonal worker, a teacher trying to stay busy during the summer months, or you simply have some extra time on your hands, racking up those part-time hours can really pay off.

But before you go out and celebrate with all the money you’ve made, it’s important to understand the tax implications of a summer job.

If I only work a summer job, do I need to file an income tax return?

If your only income for the year is from a part-time summer job, there’s a good chance you may not owe too much during tax season. This is because all taxpayers can earn up to the standard deduction amount each year without paying taxes on that income. But, if you also earned income throughout the rest of the year, you’ll want to make sure you’re prepared when tax filing season rolls around.

The standard deduction explained

If you don’t earn more than the standard deduction as an employee, you generally don’t have to file a tax return. However, if you had income tax withheld from your paychecks, you should still file a tax return to get that withheld money back as a tax refund.

The standard deduction amount depends on your tax filing status. Below are the standard deduction amounts for 2023 and 2024:

Different rules for dependents earning summer income

If a parent or guardian claims you as a dependent on their tax return, the standard deduction rules are a bit different. For 2024, the standard deduction is limited to whichever is greater:

• $1,300 ($1,250 in 2023)
• Your earned income plus $450 ($400 in 2023) up to the normal standard deduction for your filing status (see table above)

In the event you had unearned income, such as interest or dividends, totaling at least $1,300 during the 2024 tax year, you’ll also need to file a tax return. This is up from $1,250 in 2023.

If you were a student during the year, the IRS has a helpful list of what every student should know about summer jobs and taxes.

What if I’m self-employed?

If you run your own business or are self-employed (this includes working odd jobs or babysitting) and make more than $400 during the tax year, you’ll need to file Schedule C with your tax return. You’ll also need to pay self-employment tax unless you qualify for one of the exceptions. We’ll cover self-employment tax in the next section.

Summer employment taxes

To help you prepare, here’s a list of the three types of payroll taxes to pay attention to:

1. Social Security tax and Medicare tax (often called FICA)
2. Federal income tax
3. State income tax

Now that you know their names, let’s break them down.

Social Security and Medicare taxes

Employees

Your employer will automatically deduct Social Security and Medicare taxes from your paychecks if you are an employee. The Federal Insurance Contributions Act, or FICA, is a federal law requiring employers to withhold these two taxes from your wages each pay period. But, on a good note, your employer pays half of your Social Security and Medicare tax payments.

Self-employed workers (babysitters, rideshare drivers, odd jobs, etc.)

If you are self-employed, meaning you work as an independent contractor or for your own business, you must set aside money to pay your taxes. That money should include Social Security and Medicare tax, which is lumped together and called self-employment tax. The self-employment tax rate is 15.3%. This includes a Social Security tax rate of 12.4% on earnings up to $168,600 in 2024 and a Medicare tax rate of 2.9% without an earnings limit.

Be sure to keep track of all your expenses because you can deduct them from your income before paying self-employment tax. For more information on this topic, check out our Comprehensive Guide to Filing Taxes as a Gig Worker, which covers everything from self-employed tax forms to potential tax deductions. We also have a helpful article on tax deductions for rideshare drivers.

Exceptions for FICA

While the average taxpayer is subject to Social Security and Medicare taxes, a few exceptions exist. For example, if you’re under 18 and perform household work, such as babysitting or yard work, you don’t have to pay self-employment tax. The same goes for newspaper carriers, distributors, and vendors.

If Mom and Dad hire you to work in their business, there’s a good chance you may not have to pay Social Security and Medicare tax, either. However, to meet this exception, you must be under age 18, and your parents’ business must be a sole proprietorship or partnership, not a corporation. If your parents pay you for domestic work, like household chores, you don’t have to pay FICA tax if you are under 21.

Federal income tax

Another important tax to be aware of is the federal income tax. The IRS levies this tax based on your annual taxable income. The amount of federal income tax you pay depends on your filing status, dependent status, and which tax bracket you’re in. Here are the tax brackets for 2024:

State income tax

Unless you live in one of the states with no income tax, you must pay state income tax in addition to federal income tax. State income tax varies depending on each state’s tax rates, how they are applied, the type of income, and the allowable deductions and credits. However, it is usually less than the federal income tax.

The states that do not currently tax wages are Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming.

Tax exemption

You may qualify for a tax exemption if you only work during the summer. That means your employer won’t withhold income tax from your paycheck. You can claim exemption from tax withholding on IRS Form W-4 if you had no federal income tax liability last year and do not expect to this year.

If you meet the exemption criteria, you can write “EXEMPT” below Step 4(c) of your Form W-4. Typically, your employer will ask you to complete Form W-4 when you start working. This form is used to notify your employer how much tax they should withhold from your pay. Keep in mind that an exemption does not extend to Social Security and Medicare taxes, which will still be automatically withheld from your paycheck.

If there’s any chance you may earn more than the standard deduction during the year, you should expect to owe income tax. In that case, it’s better to have income tax withheld from each paycheck. It’s often easier to have money withheld upfront than to pay it all at once when filing your federal tax return.

This article is for informational purposes only and not legal or financial advice.

All TaxAct offers, products and services are subject to applicable terms and conditions.