Happy Holidays! Let's look at 2024 tax brackets

Taxing Matters: A Peek into Your 2024 Federal Income Taxes

Happy Holidays to our adored Monarch readers 💙 

Bailey here 👋🏼 with a question for you.

What’s a great way to start a new year… financial-newsletter-style? Well, by taking a peek at the federal income tax rates for 2024, of course!

Yes yes I know, most people don’t think taxes are full of cheer 😕 and TRUST ME, I DON’T EITHER!!!! But you know what IS cheery?! Being aware of the taxes we’ll have to pay on the upcoming 365 days, what their rates are, and how we can best set ourselves up for some savvy & sexy saving success 🤪

The first step in doing so is awareness, and with the IRS unveiling the shiny new tax brackets for 2024, it's like we’re getting our first glance into Uncle Sam’s (financial crystal) ball 🔮 for the 2025 tax season.

Soooo, I urge you to grab a good ol’ cup a hot chocolate and join me on this quick and merry journey through the land of progressive taxes, where we’ll (visually) uncover how your hard-earned cash will be tallied up when it's time to settle the score.

Making ‘Cents’ of (Federal) Tax Brackets

Before we dive into the digits of 2024, let's get the basics down. Federal income tax in the U.S. is like an onion – it has layers, or in this case, tax brackets. Unlike onions, however, tax brackets won't make you cry if you understand them. The system is progressive, which means you won't pay a single tax rate on your entire income. Instead, your income is sliced into portions, each taxed at its own rate, so you only pay higher rates on the higher slices of your income pie 🥧

C’mon Itemized (but here’s a titch on Standard)

A majority of this article looks at itemized deductions, not standard deductions. I did a lil article a few months ago on itemized vs. standard, but check out this nifty NerdWallet piece for a quick refresher. Basically, itemized gives people a good shot at reducing their taxable income amount, and is typically fantastic for 1. Homeowners, 2. Organized people, and 3. People who understand where to save money (like our lovely Monarch readers 🤗).

Standard issss a lot easier, though, where the government literally tells you how much to pay solely based on your filing status. For the 2024 tax year, the standard deduction will increase by $750 for single filers & married people filing separately, and increase by $1,500 for those who are married & filing jointly. Here’s the standard increase from the NerdWallet article:

Lil’ Note on State vs. Federal

While the federal tax system has its uniform brackets, states like to spice things up depending on where you live. They might have their own set of brackets or go rogue with a flat tax rate. Some states are the cool uncles that don't tax your income at all. Colorado, for example, is all about that flat life with a 4.4% tax rate, while Wyoming is living the no-income-tax dream.

You know who else is a flat income tax state? The Mitten, baby. It’s not ideal because, well, it’s still tax (and… individual cities also have additional taxes - Grand Rapids has an additional 1.5% income tax for its residents 💛), but we’re pulling through at a decent enough 4.25% flat income tax for all.

It’s important 4 me 2 restate that this article is only about Federal Income Taxes!! It’s def the largest of the bunch… so it’s important to get savings here first 😏

Looking Ahead: The 2024 Tax Bracket Shuffle

In 2024, the tax brackets (what you will pay in 2025) are getting a little boost – around 5.4% upward to be exact. This is a positive!!!!

It means that if your salary has been stuck in a time loop, you might find yourself paying less in taxes compared to 2023. And by time loop I mean you haven’t gotten a raise even though inflation is rampant and the price of eggs hasn’t increased OVER THIRTY PERCENT in less than two years.

While the rates themselves aren't changing, the thresholds are. For instance, single filers will start at 10% for incomes up to $11,600 (instead of the previous $11,000), and married folks filing jointly will do the same for incomes up to $23,200 (instead of the previous $22,000). While these don’t seem that drastic, they really do add up as you continue through the taxing ranks.

Check out the charts for single and married joint filers in 2023 vs. 2024:

Tax Brackets in Action

The verbiage of it all might be confusing, especially to the visual learners out there 😍 (me, it’s me, I’m a visual learner). So to help us all out, check out this fun progressive-taxation-example-chart I made…. followed by examples at four different income levels! Wooh!!!

Example Time

Let's play out some scenarios to see how these 2024 brackets will work in the real world. Imagine four single filers, each with different incomes: $40,000, $75,000, $150,000, and a whopping $600,000.

Here’s a breakdown of their respective payouts to the Government:

And here’s a look at the amount taxed per tax % bracket (up to $600,000).

🚨Something important to remember: this is a rough estimate because it doesn’t include or account for ANY deductions or credits you can get by being an informed baddy!! We’ve got this!!!🚨

“Conclusion”

Okay baddies I’m behind schedule and don’t have time for a cute article summarization, but I hope you found this at least a little bit helpful or informative!! Please send any ideas or topics you want covered my way!!!

(S/O Karsen for a few recommendations we’ll tackle in the new year❤️‍🔥)

ILY & TTYS,

Bailey

Sources:

1. NerdWallet: IRS Tax Changes

2. NerdWallet: 2023-2024 Federal Tax Brackets

3. H&R Block: Michigan State Income Taxes

4. City of Grand Rapids: Income Tax Rates