Everything You Need to Know About Filing Taxes for Income Earned in 2023
Let’s talk about arguably the world's most boring, but very important topic: taxes!
Federal income taxes are like that unavoidable membership fee we all pay to be part of the club called society.
Every year, those of us living in the United States must file taxes. This is 0 out of 5 stars fun and a whole lot of work (s/o to my accountant for doing most of the heavy lifting 🤠). While you don't need to become an accountant, there are some things you do need to know (and I promise not to put you to sleep).
Can You Go to Jail for Not Filing Taxes?
Short answer: YES.
Taxes are the not so fun but absolutely necessary part of adulting if you're uninterested in going to jail. I don't look cute in stripes, so I'd personally like to avoid them. When you earn money from your job, investments, or side hustles, Uncle Sam wants his share, and that's where federal income taxes come into play.
The government uses our dollars to fund various programs and services, like healthcare, education, infrastructure, and national defense, that benefit all of us in one way or another.
Now the tax code is literally longer than both the Bible and the entire Harry Potter series combined, so it's no wonder it can feel like this giant maze filled with twists and turns and magic spells. However, some pretty sweet deductions, credits, and loopholes (yep, I said it) can help you keep more of your hard-earned cash in your pocket. This allows you to spend your money on you and other causes close to your heart. 💕
So, while taxes might seem daunting at first, with a little financial education and strategic planning, you can understand the basics and minimize your tax bill legally and ethically.
2024 Income Tax Brackets
First, we need to understand the basics of how federal income taxes work. And surprise! It is not like you may think. Your income is not taxed at a flat rate. I heard someone say the other day, “I make $100,000, so 22% of my income goes to taxes!” and that is incorrect. If you make $100k, only a portion of your income is taxed at 22%. You see, there's something to the whole tax bracket thang because you are taxed in literal brackets.
Uncle Sam sorts your income into different brackets, kind of like layers of a cake. As you earn more dough, each layer gets taxed at a progressively higher rate. But here's the most important part to note: when you climb into a higher tax bracket, you're not paying that top-rate tax on every dollar you make; you only pay the higher rate on the chunk of cash that lands in the new bracket.
Check out the 2024 Federal Income Taxes below for each bracket (if you're filing single):
No matter how much money you make, whether it's $20,000/year or $500,000/year, the first $0 to $11,600 is taxed at 10%, the next $11,601 - $47,150 is taxed at 12%, and so on.
It's a graduated tax bracket.
If you're married, filing jointly, this is what your Federal Income Taxes will look like in 2024:
So why is this important to know? Because I've heard too many people saying no to pay raises or bonuses because it “bumps them up a tax bracket." Don't ever say no to more money because of that! You will never take home less money by making more money. So say yes to all the raises and bonuses 🎉
What is a Tax Return?
Now that we understand how federal income taxes work, let’s break down tax returns. A tax return is essentially a comprehensive document that we submit to the IRS (Internal Revenue Service) detailing our income, expenses, and other important financial sh*t Uncle Sam wants to know about. He's very nosy and has no shame in his game.
Think of your tax return like your Spotify Wrapped—except instead of covering how much time you spent listening to Taylor Swift and Rihanna, it covers how much money you made and how much you can deduct.
What’s Included in My Tax Return?
First and foremost, income. You show this through your W-2s or 1099s. This section must include ALL wages, dividends, self-employment income, royalties, and capital gains.
Oh, and according to the IRS, you must report any bribes, illegal activities (such as dealing illegal drugs), and stolen property because, yes, this counts as income, too. The more you know!
If I was an accountant, I’d be wearing a pink blazer, always.
Next, we have deductions—and these babies reduce your taxable income. WE LOVE DEDUCTIONS 😍. Some common deductions are 401k contributions, HSA contributions, student loan interest, and charitable contributions. We love deductions so much that we have a whole section dedicated to them below.
Finally, we have tax credits. These also offset the amount of taxes owed and can vary quite a lot. Some examples of tax credits are the care of dependent children and seniors, electric vehicles, and so many more.
Why Do We Pay Taxes?
Taxes provide the federal, local, and state governments with the funds to provide essential services that we all need, such as highways, social services, schools, parks, and much more.
These things are very important, but if you're anything like me, you'd ideally like to pay a little less in taxes and use those dollars to support other causes close to your heart!
So that leads us to…deductions!
What Are Tax Deductions?
Tax deductions are expenses that you can subtract from your taxable income, which means they lower our tax bill (how much money we owe the IRS)! Various types of tax deductions are available, ranging from contributions to retirement accounts like IRAs and 401ks to expenses related to homeownership, education, healthcare, and charitable giving.
One of the most common tax deductions is the standard deduction, which is a flat amount that the IRS allows you to deduct from your taxable income without having to itemize your deductions.
For the 2023 tax year, the standard deduction is:
💸 $13,850 for single or married filing separately
💸 $27,700 for married couples filing jointly
💸 $20,800 for head of household
*The year is not a typo – we're talking 2023 right now since those are the taxes we're working on and that are due on April 15, 2024 😎
However, many people may benefit from itemizing their deductions instead, especially if they have significant expenses in categories like mortgage interest, property taxes, medical expenses, or charitable contributions.
Note that you will take either the standard deduction or itemize. If you itemize and it's less than the standard deduction, you're usually better off not itemizing.
Regardless of whether you take the standard deduction or itemize, though, you can deduct these expenses:
💰 Alimony payments
💰 Business use of your car and/or home
💰 Money you put in a traditional IRA*, traditional 401k, or HSA
💰 Student loan interest
💰 Teacher expenses ($300; $600 if both spouses are teachers)
💰 For some: work-related education expenses
💰 For military service members: moving expenses
*Note the little asterisk by the IRA. Only certain peeps get to deduct those contributions. You can see if you qualify here.
Other common tax deductions include expenses related to healthcare, such as medical and dental expenses that exceed a certain percentage of your adjusted gross income, as well as education-related deductions like student loan interest and tuition fees.
If you're self-employed or own a small business, you may be eligible to deduct business-related expenses such as office supplies, equipment, travel, and professional fees.
But again, always work with an accountant to make sure what you are deducting is deductible in the eyes of Uncle Sam.
Federal Income Tax Due Date
So, when are federal income taxes due? This year, the tax filing deadline, also known as Tax Day, is Monday, April 15, 2024. Tax Day typically falls on the 15th of April but can be delayed some years if it falls on a weekend or holiday. Do not miss the tax filing deadline! This can have some severe repercussions, like penalties and interest.
Wrapping Up
So there you have it. There are a million and one things you can learn about taxes, but if you wanted to know all of those things, you would have become an accountant! Knowing these basic things, though, ensures you can have an active seat at the table when tax season rolls in — because remember: nobody cares about your money as much as you.
