I had a job from 2005 to November 2007. For the past 12 months I have been unemployed because I am going to school and have been lucky my father has deposited money in my savings account and I basically live off that. Since I did not work, do I still have to pay taxes even if my only source of money is from the interest?
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The easy answer is, if your total interest plus unemployment payments (if any) are less than $5,000, then there is basically no way you are going to have a federal income tax liability…and you won’t have to file a federal income tax return. If it exceeds $5,000, it doesn’t mean you will definitely have to file a tax return, but it means we need to ask you more questions. Let us know if you expect your income (unemployment, interest, etc.) will exceed $5,000 in the calendar year.
As far as your state goes, each state is different. Some don’t tax any income. Some only tax interest. Some are like the feds in that they don’t require you to file a tax return if your interest is below a reasonable amount. And some require you to file a tax return even if you have a very small amount of interest. For example, TX, FL, AK, NV, and TN don’t require a tax return (there are others too, but I’m too tired to look them up). In CA, you’d need a boatload of interest before they’d tax you. PA wants you to file a tax return even if you have as little as $33 of interest. States typically don’t tax unemployment income. At least, I’ve never seen one that did.
If you collect enough interest, you might owe tax, but if you are living off the principal mostly, then only the interest would count as income.
If you collect $ 100,000 interest you would owe tax. If you collect $2000 interest and have no other income you would owe no tax even if you withdrew $ 100,000 principal plus $ 2000 interest.
The interest is taxable income, and you have to report that and pay tax on it if it’s enough for you to be required to file – if you are a dependent, the limit is $5450 for 2008. But that’s only on the INTEREST – the money your dad deposits isn’t taxable to you.
It depends on the amount of interest that you are receiving.
If the interest is over the annual filing requirement, yes you have to file.
Interest on savings is taxable. It still has to be more than your standard deduction and exemption before you pay taxes. If you are a dependent than more than the standard deduction.
Income from whatever source is taxable in the US. See your tax advisor.