Tax Minimization

Tax Planning: 2024 Free Money!

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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?)

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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.

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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.)
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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:

Free Money! Comparison: 2024 vs. 2023
2024 FM!
2023 FM!
MFJ Standard Deduction
$29,200
$27,700
0 Child-Tax Credit
$0
$0
Total Free Money Amounts
$29,200
$27,700
A 2024 Free Money! Increase of $1,500!

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.

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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:

2024 Income with
Tax Bill of $1k, $2k, & $3k
$1k Tax Bill
$2k Tax Bill
$3k Tax Bill
2024 Free Money!
$29,200
$29,200
$29,200
Additional Income @ 10%
$10,000
$20,000
$23,200
Remaining 10% Money
$13,200
$3,200
$0
12% Money
$0
$0
$5,667
Total Income
$39,200
$49,200
$58,067
– Tax Owed
-$1,000
-$2,000
-$3,000
Total After-tax Income
$38,200
$47,200
$55,067
Effective Tax Rate
2.55%
4.07%
5.17%
Remember, YOU Decide How Much You’ll Pay in Taxes!

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:

2024 Income Options
After Taxes
Tax Bill of $0
($29,200)
Tax Bill of $1k
($38,200)
Tax Bill of $2k
($47,200)
Tax Bill of $3k
($55,067)
Month
$2,433
$3,183
$3,933
$4,589
Week
$562
$735
$908
$1,059
Day
$80
$105
$129
$151
More Than $2.4k a Month No Matter How You Slice It!

Depending on where they live, most frugal people that I know could make due the income amounts above.

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Final Thoughts

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,

Gerry

2024! Free Money! Video to Walk You Through the Numbers

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If you don’t have any children and file “Single, MFS, MFJ,” here’s your table:

2024 Free Money for:
Single & MFS
MFJ
Standard Deduction
$14,600
$29,200
Credits
$0
$0
Total Free Money
$14,600
$29,200
Remaining 10% Bracket
$11,600
$23,200
Free Money + 10%
$26,200
$52,400
Tax Owed
$1,160
$2,320
Effective Tax Rate
4.43%
4.43%
Effective tax rate of 4.43% with the entire 12% bracket remaining!
Remaining 12% Bracket
$35,550
$71,100
Free Money + 10% + 12% Brackets
$61,750
$123,500
Tax Owed
$5,426
$10,852
Effective Tax Rate
8.79%
8.79%
Effective tax rate of 8.79% at the end of the 12% tax bracket.

If you have children and file “MFJ,” here’s your table:

MFJ + Children:
+ 1
+ 2
+ 3
+ 4
+ 5
Standard Deduction
$29,200
$29,200
$29,200
$29,200
$29,200
Credits
$20,000
$37,200
$53,867
$70,533
$87,200
Total Free Money
$49,200
$66,400
$83,067
$99,733
$116,400
Remaining 10% Bracket
$3,200
$0
$0
$0
$0
Free Money + 10%
$52,400
$66,400
$83,067
$99,733
$116,400
Tax Owed
$320
$0
$0
$0
$0
Effective Tax Rate
0.61%
0%
0%
0%
0%
Effective tax rate of 0% to 0.61% with some room available in the 12% tax bracket.
Remaining 12% Bracket
$71,100
$57,100
$40,433
$23,767
$7,100
Free Money + 10%
+ 12% Brackets
$123,500
$123,500
$123,500
$123,500
$123,500
Tax Owed
$8,852
$6,852
$4,852
$2,852
$852
Effective Tax Rate
7.17%
5.55%
3.93%
2.31%
0.69%
Effective tax rates of 0.69% to 7.17% for six-figure income!

If you file “Head of Household,” here’s your table:

HH + Children:
+ 1
+ 2
+ 3
+ 4
+ 5
Standard Deduction
$21,900
$21,900
$21,900
$21,900
$21,900
Credits
$19,425
$36,133
$52,758
$66,550
$75,641
Total Free Money
$41,325
$58,033
$74,658
$88,450
$97,541
Remaining 10% Bracket
Child tax credit of $2k per child covers the entire 10% bracket!
Free Money + 10%
$41,325
$58,033
$74,658
$88,450
$97,541
Tax Owed
$0
$0
$0
$0
$0
Effective Tax Rate
0%
0%
0%
0%
0%
Effective tax rate of 0% with some room available in the 12% tax bracket.
Remaining 12% Bracket
$43,675
$26,967
$10,342
$0
$0
Free Money + 10%
+ 12% Brackets
$85,000
$85,000
$85,000
$88,450
$97,541
Tax Owed
$5,241
$3,236
$1,241
$0
$0
Effective Tax Rate
6.17%
3.81%
1.46%
0%
0%
Effective tax rate of 0% to 6.17% for $85k (or more) of income!

If you have children and file “Married Filing Separately,” here’s your table:

MFS + Children:
+ 1
+ 2
+ 3
+ 4
+ 5
Standard Deduction
$14,600
$14,600
$14,600
$14,600
$14,600
Credits
$18,600
$35,267
$49,759
$58,850
$67,941
Total Free Money
$33,200
$49,867
$64,359
$73,450
$82,541
Remaining 10% Bracket
Child Tax Credit of $2k per child covers the entire 10% bracket!
Free Money + 10%
$33,200
$49,867
$64,359
$73,450
$82,451
Tax Owed
$0
$0
$0
$0
$0
Effective Tax Rate
0%
0%
0%
0%
0%
Effective tax rate of 0% with some room available in the 12% tax bracket.
Remaining 12% Bracket
$13,950
$0
$0
$0
$0
Free Money + 10%
+ 12% Brackets
$47,150
$49,867
$64,359
$73,450
$82,451
Tax Owed
$1,674
$0
$0
$0
$0
Effective Tax Rate
3.55%
0%
0%
0%
0%
Effective tax rate of 0% to 3.55% for $47k (or more) of income!

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This Post Has 18 Comments

  1. Thank you for still putting these together. As a teacher getting into the FIRE world, your blog has been incredibly helpful!

  2. As always, huge props to the man, the myth, the Legend! Appreciate it, Gerry! Working on making my 2024 plan right now including maxing a Vanguard 403b, two ROTH IRAs, and hopefully 6-7k to taxable brokerage account all on my single teacher income! Thank you for helping us maximize our tax efficiency!

    1. Hi Shawn,
      A credit simply cancels a tax obligation. Most people with kids under 17 can use the Child Tax credit which eliminates $2k of tax obligations. I hope this helps, G

    1. De nada Miles! Actually, I have to crank this post out every year for my own usage too. Plus, I share the info with my family and friends to remind them of just how weird I really am! Happy tax planning! G

  3. Thanks for the wonderful blog as always! I listen and re-listen to podcasts you appear on for motivation. I’m a teacher and performer (music) and am maxing my 457 (thanks to you) in addition to my 403b from my other job…Many thanks for it all!

      1. Thanks so much, Gerry! Do you use excel when doing your calculations? Or perhaps some other tax software? I find that all of the calculators online will not let me add both my 457 and 403b contributions at once. I am just trying to get a rough idea of how much I save in taxes and effective tax rate(s), and was just wondering if you have found or created any resources for this.

  4. You should also qualify for Other Dependent Tax Credit of $500. This credit can be claimed for Dependents that don’t qualify for Child Tax Credit.

    https://www.irs.gov › newsroom › u…
    Understanding the Credit for Other Dependents – IRS

  5. Thanks for still putting out this article, I look for it yearly 🙂 Your son should still qualify for a $500 tax credit, it’s not nothing.

    1. Hi ElleXNC! All is well here. My son just graduated and we’re going to Mexico later this month. I’ll try to write again when I finish my doctorate this summer. Thanks for checking up on me, G

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