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Owe the IRS? Your Home Equity Could Help with Your 2025 Taxes

9 min read

By Hometap Team on February 21, 2020

Last updated February 20, 2025

Technically, you have 10 years to pay your taxes — but they add up, and time goes by fast — so, whether you owe $5,000 or $50,000 it’s best to start paying down your bill as soon as possible. Avoiding payment can lead to the IRS taking money directly from your wages or bank account, or even putting a federal tax lien against your property, which may impact your ability to take out loans, access your home equity, and more.

If you owe money this year or from prior years—don’t panic. Here are some important updates and options to get your finances back on track.

What we'll cover:

What’s New for the 2025 Tax Season (for the 2024 Tax Year)

Important Tax Dates:

April 15: Filing deadline for most U.S. residents
October 15: Filing deadline if you were granted an extension

2024 Tax Brackets

Your first step should be understanding what bracket you fall into:

	Single
10%	$0 to $11,600
12%	$11,601 to $47,150
22%	$47,151 to $100,525
24%	$100,526 to $191,950
32%	$191,951 to $243,725
35%	$243,726 to $609,350
37%	$609,351 or more

	Single	Married, filing jointly	Married, filing separately	Head of household
10%	$0 to $11,600	$0 to $23,200	$0 to $11,600	$0 to $16,550
12%	$11,601 to $47,150	$23,201 to $94,300	$11,601 to $47,150	$16,551 to $63,100
22%	$47,151 to $100,525	$94,301 to $201,050	$47,151 to $100,525	$63,101 to $100,500
24%	$100,526 to $191,950	$201,051 to $383,900	$100,526 to $191,950	$100,501 to $191,950
32%	$191,951 to $243,725	$383,901 to $487,450	$191,951 to $243,725	$191,951 to $243,700
35%	$243,726 to $609,350	$487,451 to $731,200	$243,726 to $365,600	$243,701 to $609,350
37%	$609,351 or more	$731,201 or more	$365,601 or more	$609,351 or more

Source: Internal Revenue Service

Form 1099-K Reporting Changes

If you received any third-party payments via online platforms in 2024 for goods or services that exceeded $5,000, you’ll get a Form 1099-K for payment card and third party transactions that you’ll need to fill out. However, personal reimbursements or gifts from family or friends received through third-party platforms are not taxable. In previous years, Form 1099-K was only issued if a taxpayer completed more than 200 transactions in a year that totaled more than $20,000.

Premium Tax Credits

The Premium Tax Credit was introduced in 2022 and is a refundable credit that’s intended to make health insurance more affordable for eligible individuals and families with low to moderate income. For 2024, to be eligible, you must:

Have a qualifying household income amount
Not be claimed as a dependent by another person
Not file your return under the status of Married Filing Separately (except in certain circumstances involving domestic abuse or spousal abandonment)
Meet certain requirements around health insurance

Clean Vehicle Credit

You may be eligible for a nonrefundable credit of up to $7,500 if you purchased a qualifying, new plug-in electric vehicle for your own use in 2022 or prior (for vehicles purchased after this time, the qualifications are a bit more complicated).

Child Tax Credit

For the 2024 tax year, the child tax credit is up to $2,000 per child under age 17 who is claimed as a dependent on your return. Note that if your modified adjusted gross income (AGI) exceeds $400,000 on a joint return or $200,000 on a single/head-of-household return, your credit amount will be reduced by $50 for each $1,000 you earn beyond this threshold.Finally, the credit is no longer fully refundable in most cases — except for select lower-income taxpayers, for whom up to $1,500 may be refunded.

Child and Dependent Care Credit Updates

The child and dependent care credit can provide some relief from the cost of care for eligible children or other dependents, and it’s calculated based on both your income and a percentage of the expenses of care. For the 2024 tax year, you can receive a credit of 20% to 35% of your income for a maximum of $3,000 for one qualifying individual and $6,000 for two.

Earned Income Tax Credit Updates

If you’re a low- to moderate-income worker as defined by the following maximum income criteria, you may be eligible for a tax credit:

0 children or relatives claimed: $18,591 (single filer), $25,511 (married, filing jointly)
- Maximum credit: $632
1 child or relative claimed: $49,084 (single filer), $56,004 (married, filing jointly)
- Maximum credit: $4,213
2 children or relatives claimed: $55,768 (single filer), $62,688 (married, filing jointly)
- Maximum credit: $6,960
3 children or relatives claimed: $59,899 (single filer), $66,819 (married, filing jointly)
- Maximum credit: $7,830

Steps for Filing and Options for Assistance

If you owe more than you expected this tax season, there are a few things you can do to alleviate the financial burden.

1. File — Even if You Can’t Pay in Full

As you get ready to prep your 2024 taxes—and any back taxes you still need to file—remember that filing can help reduce the amount of money you owe in the long run. As H&R Block notes, the IRS imposes a hefty “failure to file” penalty, equal to 5% of the unpaid balance each month, up to 25% of your unpaid taxes. With the added penalties, that means the interest accruing on your unpaid taxes will be higher, too. Plus, if your income was $84,000 or less in 2024, you can take advantage of IRS Free File. After you file, you can track your refund status via this tool on the IRS website.

2. Request an Extension

If you need more time to organize files for your taxes, or come up with a game plan because you know you owe more than you can pay, you can file for a six-month extension.

While filing an extension for your 2024 taxes doesn’t buy you more time for paying taxes (you still need to estimate the amount you owe and pay it), it does ensure you won’t begin to accrue late-filing or late payment penalties right away. As TurboTax explains, “if you pay less than 90% of the tax you owe, you’ll end up owing a penalty of 0.5% of the underpayment every month” until your balance is paid.

3. Explore IRS Payment Options

The IRS allows multiple options for paying your taxes, and you may even be able to temporarily delay collection of your taxes based on your financial situation. Here are some of the most common choices for paying your taxes:

Set up a short- and long-term payment plan. Each has an application fee that varies depending on your plan and financial status. However, note that interest and other penalties that will continue to add up for either of these options as long as you have an outstanding balance. The IRS interest rates are subject to change quarterly.
File an Offer in Compromise that allows you to settle your IRS debt for an amount that’s less than the total you owe. If you’re a homeowner, you may find your home — likely your biggest asset — disqualifies you. Since you have equity in your home, the IRS sees that as a means to pay your taxes.

4. Access Your Home Equity to Help with Taxes

Not paying your taxes can result in a lien on your home, making it harder — if not impossible — to access your home equity. But you can access your home equity to settle your debt before a lien is placed on your home.

Paying off your taxes with a home equity loan, especially if you owe more than you can pay off in a single credit card payment, allows you to avoid taking on bad debt. Unlike credit cards that average more than 24% interest, a home equity loan only averages 6.63%. When you file, you’ll know the lump sum you owe, which may make a home equity loan more appealing than a home equity line of credit (HELOC). With either, you’ll want to make sure you can afford payments, as you risk foreclosure if you can’t make your payments.

Note that following the 2017 Tax Cuts and Jobs Act, the interest you pay on a home equity loan or HELOC is no longer tax deductible if you use it for paying off taxes. Interest on these loans only qualifies for a tax deduction if you use the loans to make home improvements.

Related: Read HELOCs & Home Equity Loans: What’s the Difference and Is Either Right for You? for more on how these two differ >>

Another option is accessing your home equity via a home equity investment. Unlike a loan, a home equity investment gives you cash now in exchange for a share of the future value of your home.

Since it’s an investment, rather than a loan, there are no monthly payments. Instead, you settle the investment when you sell your home or buy out the investment. Plus, with home equity investments from companies like Hometap, your debt-to-income ratio isn’t a qualification factor as it is with home equity loans.

You should always do the research and the math to find out which payment method works best for your financial situation. You may find accessing your equity is a more affordable way to pay off your taxes than the IRS payment plan—or vice versa.

Interested in finding out how much of your home equity you might be able to tap into? It only takes a couple minutes.

Get an estimate

You should know

We do our best to make sure that the information in this post is as accurate as possible as of the date it is published, but things change quickly sometimes. Hometap does not endorse or monitor any linked websites. Individual situations differ, so consult your own finance, tax or legal professional to determine what makes sense for you.

Related Tags:

Home equity, Taxes

The team here at Hometap is made up of a diverse group of finance professionals with a wide array of backgrounds and expertise, including mortgage loan processing, banking, real estate, and entrepreneurship. But most importantly, we're homeowners on a mission to make every stage of homeownership less stressful.