10 Common Questions to Tax Season

Tax season is right around the corner. And for many of our users—including climate-conscious shoppers and global entrepreneurs—it can be challenging to gather everything you need to file by April 15th, let alone plan for next year. 

In this article, we’ll cover some of the most common questions related to tax season in the US, from recent IRS updates to green tax credits and accounting for foreign income. 

1. When Does Tax Season Start?

In 2024, the tax season begins on January 29th and lasts until April 15th, 2024. 

2. What Are the Updated IRS Income Brackets and Deductions?

The IRS updated the income tax bracket and standard deductions for filing 2023 taxes. In particular, they have increased the income brackets, allowing individuals to take advantage of higher standard deductions.

Let’s take a look at the new income tax rates:

Next, the standard deductions also increased from 2022 for all filing statuses:

3. Where Can I File My Taxes?

There are several different options for filing taxes, both paid and free. 

The IRS offers two Free File options. First, you can use their Guided Tax Software if your Adjusted Gross Income (AGI) is under $79,000. The second option is to use the electronic tax form without guidance. This option is available to those with an income greater than $79,000. 

You may also use third-party programs such as H&R Block or TurboTax. These are automated, DIY software that over pro-tax help for additional fees. For individuals with side businesses or moonlighting as a 1099 employee, you may be required to upgrade from the free versions of these software to paid packages. 

4. Can I File Two Tax Returns?

When it comes to federal tax returns, you should only file one return. This is true even if you have multiple jobs or have a side-hustle.

State returns are a little different. If you lived and worked in multiple states, you may be required to file multiple state returns. 

If you made a mistake on your original federal tax return, you should not file a new one. Instead, you can use Form 1040-X to amend your return. 

5. Should I Include My Side-hustle Income in My Taxes?

Earning more than $400 from a side hustle or job requires you to include this income in your tax return. The IRS considers you self-employed once you reach this threshold. As a result, you will need to pay self-employment tax and medicare tax on this income.

However, you can also leverage additional deductions. You can generally take off a portion of your expenses from gig work. Potential deduction categories include tools, materials, home office expenses, mileage, and relevant internet or phone bills. 

6. What Are Capital Gains Taxes?

Individuals who sell an investment, such as a stock, bond, or other asset, during the tax year must claim capital gains. Long-term capital gains tax assets held for longer than a year, while short-term gains relate to assets bought and sold within the same tax year. The amount owed depends on your income tax bracket. 

7. What if I Lived Abroad During the Year?

The United States is one of the few countries that requires citizens living abroad to file taxes. However, there are two potential deductions.

If your stay in the U.S. was 30 days or less, or there is an income tax treaty in effect in your country of residence, it’s possible to use the Foreign Earned Income Exclusion (FEIE). The FEIE allows you to exclude a portion of your earned income from your tax returns.

The second option is the Foreign Tax Credit (FTC). This approach is used to claim credit for paying taxes to a foreign government. 

You cannot use these options together. You also cannot exclude investment or passive income with these credits. If you are self-employed and living abroad, you are still liable for self-employment and Medicare taxes.  

8. What Happens if I File My Tax Return Late?

If you are owed a refund, there is no penalty for filing your taxes late. However, if you owe taxes and pay late, there is a 5% every month after the deadline. 

9. Are there Green Tax Credits?

What many people may not realize is that there are tax incentives to going green. Below are some tax credits available for sustainable initiatives.

• Residential Clean Energy Credit – This credit allows both homeowners and renters to take up to 30% off the cost of qualified energy properties installed from 2022 to 2032. The amount you earn from this credit cannot exceed the tax owed. Qualified energy properties include solar electric panels, solar water heaters, wind turbines, geothermal heat pumps, fuel cells, and battery storage technology. 

• Home Energy Efficiency Credit — There is also a credit for improving your home through updating items like exterior doors, windows, skylights, insulation, air cognition, biomass stoves, and performing home energy audits, among other things. Taxpayers applying for this home energy efficiency credit can save up to $2,000, depending on the update and its cost. 

• Clean Vehicle Credit — If you purchased a new electric vehicle (EV) or a fuel cell vehicle (FCV), you may be eligible for a credit of up to $7,500. The total amount earned depends on when the vehicle was delivered. Eligibility for this credit also depends on your adjusted gross income (AGI), whether it was purchased for personal use, and whether the vehicle is used primarily in the US.

• Alternative Fuel Vehicle Refueling Property Credit — If you installed a vehicle refueling or recharging station in your home, you might also be eligible for up to $100,000 per item, depending on when the alternative fuel property was bought and its depreciation percentage. However, the credit amount cannot exceed the tax owed.
  

10. How to Prepare for the Next Year?

The best way to prepare for taxes is to be proactive. Outside of maintaining your personal information, you can consider leveraging additional deductions in the 2024 tax season.

Many of the green credits mentioned above are either ongoing or will be in place until 2032. Therefore, you can plan purchases to make your home or vehicle more energy efficient, knowing you can leverage a tax credit. 

You may also choose to add donations to sustainable charities to your budget. If you make a monetary donation above $250, you must keep a receipt or another form of written communication from the charity. Noncash-related donations above $500 also require filing another form. These donations are a part of itemized deductions. 

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