Tax season is here, and the filing deadline for most taxpayers is April 15. Mark this date on your calendar to ensure timely submission and avoid late penalties.
Filing taxes, while not always enjoyable, is a necessary task that can be made easier with organization and information. A tax return is an annual report you submit to the IRS and potentially your state to determine your tax liability or refund. Understanding the basics can save you time and money. Most people will need to file each year, and even if you aren't required to file, you might be eligible for a refund. For 2024, individuals under 65 must file if they earn $14,600 or more; for married couples filing jointly, the threshold is $29,200. You may have to file a state tax return as well, if you live in a state with income tax, and each state sets its own rules.
Understanding key tax concepts can make filing your taxes easier. First, not all income is taxable. You start with your gross income (earnings from jobs, side gigs, and investments) and subtract above-the-line deductions, such as contributions to health savings accounts, IRA contributions, student loan interest, and alimony payments. This gives you your adjusted gross income (AGI). From there, you choose between taking the standard deduction ($14,600 for single taxpayers in 2024) or itemizing deductions (e.g., mortgage interest, state and local taxes, charitable contributions) if they exceed the standard deduction.
Another important concept to understand is tax brackets. The US tax system is progressive, meaning higher incomes are taxed at higher rates. Income is divided into seven tax brackets, with each portion taxed at its corresponding rate. Your marginal tax rate is what you’d pay on your next dollar of income, while your effective tax rate is your total tax paid divided by taxable income.
In addition, tax credits directly reduce the amount you owe, offering more value than deductions. For example, a $1,000 tax credit reduces your taxes by $1,000, while a $1,000 deduction saves you only a percentage of that amount based on your tax bracket. Common tax credits include the child tax credit, adoption tax credit, and earned income tax credit. Some are refundable, meaning you could receive money back even if the credit exceeds your tax liability.
You should also make sure you stay organized with your documents and make sure you’re aware of all the tax-related deadlines–check them out below.
Decide how you want to file when you are ready. Options include IRS Free File (if AGI is $79,000 or less), online tax software, a tax professional, or paper and mail. Confirm the IRS has received your return. If you expect to owe more than $1,000, you're expected to make quarterly tax payments. If necessary, you can request a six-month extension by completing IRS Form 4868.
