Quick Tax Tip: Understanding Tax Brackets (2024)

I had my least favorite conversation with a client this week - the one where they are hit with a big tax bill and there’s no type of planning we can do to lower it. because of the nature of the income.

They said something to the effect of “What’s the point of making so much money if I get taxed more?” While it’s true you get taxed more as you make more, it’s not a dollar for dollar increase as you move up brackets going back to the first dollar you made, it’s only an increase in each dollar you make over a certain amount. Here are the tax brackets for 2024:

2024 Tax Brackets

This means even if you’re in the highest tax bracket, you’re only paying 37% tax for any amount made over those amounts listed. The amounts listed in that chart are what are known as marginal rates. So if you’re single and made $600,000, your marginal tax rate would be 37%, but your effective tax rate, which is the tax rate you paid on all your income combined, would be lower than that. In short - it’s ALWAYS a good idea to make more money, regardless of moving up tax brackets, because you still have more cash in your pocket at the end of they day.