How Taxes Work

April 2, 2024

Every spring, Americans grumble as they file their taxes. They are frustrated with a complicated system. Here's a basic summary on taxes in America:

The US has a progressive tax system, meaning as your income increases, your tax rate increases as well.

Tax rates are marginal, which means all of your income is not taxed at your highest rate.  

Marginal Tax Rate = The highest rate at which you are taxed.  

Effective Tax Rate = Your average tax rate.

Here are the rates for 2024:

Here's An Example:

A couple earns $300k in total taxable income, married filing jointly. Here's at which rates their dollars would be taxed:

Based upon this example, the couple would owe approximately $58k in federal taxes, making their effective tax rate 19.3% ($58k / $300k).

What About Taxes for Retirees?

The same math from above will apply. Understanding the various brackets can help retirees enhance their liquidation strategy.

Did you know...the most common sources of retirement income are generally taxable:

More Steam Behind This Rally?

The stock market has continued its tremendous run into 2024 as January, February, and March were all positive. Naturally, investors wonder if down days are coming...

But consider this post from Ryan Detrick. who's content is always top-shelf. Since 1950, we've seen stocks gain in January, February, and March 20 times (this year is the 21st).

During 19 of the previous 20 instances, stocks continued to gain during the remaining 9 months of the year, averaging +9.8%. Stock market momentum is real thing!
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