Enjoying Ourselves at Mexico Beach, FL
Greetings taxophiles and taxophobes alike! After last year’s Free Money! debacle, I swore to myself that I wouldn’t drag my feet on the 2024 Free Money! post. So, here it is! (I didn’t’ post last year’s Free Money! post until July! Does anyone even read my blog anymore?)
Here are the referral links for the credit cards we currently use:
Good-Bye Child Tax Credit
Last year’s 2023 FM! left me a little bummed out since our son no longer qualified for the child tax deduction. Watching $2k in tax obligation vanish every year was a beautiful sight…those were the days! From here on out we’ll never enjoy the benefits of the child tax credit ☹. Nevertheless, we decided to let our son live with us until he graduates from high school in May of 2024.
Helping Out with Disaster Relief after Hurricane Idalia
While our only FM! source for 2024 will be the standard deduction, there is some good news. The 2024 standard deduction will increase to $29,200. Before we go any further with this captivating tax talk, let answer a basic question:
What is Free Money! Exactly?
Free Money! refers to the amount of income:
you can earn before you owe any federal income tax.
FM! represents your 0% tax rate for your federal income taxes (not your state or FICA tax rate). The FM! calculation for most people consists of two components: 1.) the standard deduction and 2.) the child tax credit. (However, keep in mind that once your adorable child tax credit turns 17, that credit is gone forever.)
Free Money! Components Recap
The standard deduction depends on the status of the taxpayer:
- Single * $14,600
- Married Filing Separately * $14,600
- Head of Household * $21,900
- Married Filing Jointly * $29,200
The child tax credit provides a tax credit of:
- $2,000 per child (ages 0-16)
- the income value of the credit depends the taxpayer’s tax bracket (e.g., 0%, 10%, 12%, etc.)
Before I go any further, be forewarned…
Newsflash: I’m Not a Tax Expert!
Okay, here’s your chance to turn back and retreat to safety. Prepare yourself for a disturbing truth– I am not a tax expert. In fact, taxes confuse me just as much as the general public. This blog post is not personalized tax advice because I’m NOT a CPA, accountant, or tax preparer. Instead, I’m just a regular guy trying to keep my tax bill in check by understanding how my income affects my tax rate.
2024 vs 2023
Since the MFJ standard deduction is going up by $1,500, there is a little good news for 2024. Here is how our 2024 FM! amount compares to last year’s amount:
Alright, things could be worse, right? After all $1,500 more a years means we’ll have an extra $125 a month to play with.
Thanks to the Great Debasement over the last few years, we’ll probably need more than $29,200 to live on in 2024. So, now it’s up to us to decide how much we want to pay in federal income taxes. (Yes, we choose the amount; it is not chosen for us!)
Here are our 2024 income options based on federal income taxes of $1k, $2k, and $3k:
Tax Bill of $1k, $2k, & $3k
Would you take a look at those effective tax rates! The lowest rate is 2.55% with net total income of $38,200 while the highest rate is 5.17% with a net total income of $58,067. Those are decent amounts of income (yes, I’m working-class scum!) with very small tax bites.
Eternal Confuse Note: Because the 10% tax bracket for MFJ is $23,000 for 2024, the calculations are pretty easy. For the $1k example, a tax bill of $1,000 results in $10,000 of additional income ($1,000/.10%). For the $2k example, a tax bill of $2,000 results in $20,000 of additional income ($2,000/.10%). Finally, the tax bill of $3k yields an additional $28,867 of income ($2,320/.10%) + ($680/.12%). (If this sexy tax math confuses you, don’t feel bad because taxes are confusing to most people.)
Here’s what our 2024 income options look like after taxes:
Depending on where they live, most frugal people that I know could make due the income amounts above.
Since we now have our 2024 FM! tax numbers, we are ready to make informed tax decision for the upcoming tax year. As always, I have included tax tables to help my readers as they devise their own tax plan; see below.
Yours in Tax Preparedness,
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If you have children and file “MFJ,” here’s your table:
+ 12% Brackets
If you file “Head of Household,” here’s your table:
+ 12% Brackets
If you have children and file “Married Filing Separately,” here’s your table:
+ 12% Brackets