Lacking a Nail

Tax season is here. There were a few years when I owed taxes. I know the ideal is to have your tax refund be as low as possible. Without it crossing into payment territory. My ideal is to not owe anything at all and not care about how large or small the refund is. These last couple of years, literally, this is my second year doing this. I’ve been trying to estimate the amount to take out of my check instead of leaving it to the worksheet.

My “tax math” doesn’t take any promised credits into account. The only deduction I assume I’ll get is the standard deduction. Due to being paid an hourly wage we can and do earn overtime, though it is dependent on our employer. We’re also lucky enough to have companies that give a yearly bonus, which is not a set amount. Combined with annual pay raises (another thing we’re lucky to get) for year three I’ve decided to choose a random number to add to the estimated income.

Remember, this is literally the second year that I’ve done this. The first year we received a healthy refund, I tweaked the formula a little and actually tried including more pretax items. Around November I started being nervous and it looks like I may have underestimated how much should be withheld. We’ll see how it works out. I’m confident I’m on the right track so I’ll share my tax math below.

1. What will you make this year?
   • If you’re salaried you already know. If your commission I don’t know how to help you. If you’re hourly, you’re in the same boat as me.
     • Hourly rate x 40 hours x 52 weeks = Estimated Base Pay
     • If you have overtime and/or a bonus you need to decide.
       • If it’s large enough to matter, add it to the expected pay.
       • If it’s negligible, ignore it. Ignoring it may come back to bite you later.
     • Estimated Base Pay + Anticipated Overtime/Bonus = Estimated Yearly Income
2. Do you have any benefits or deductions that are pretax?
   • These will lower the amount of money you pay taxes on. Including any of these items is up to you. If you want to play it safe take fewer into account.
     • Traditional 401(k) – if you are a two income home and you withhold different percentages or only one uses a traditional 401(k). Do this step for the income it applies to, not the combined income.
       • When setting this up we usually set up a percentage to be removed and not a flat rate.
       • Estimated base pay – Traditional 401(k) contribution% = Retirement
     • HSA contributions. Only what you contribute counts. Do not count anything your company contributes. My company takes this out every paycheck.
       • Your HSA contributions x 26 = Total HSA
     • Medical Insurance – If I didn’t have an HSA plan I would probably include medical in my math tax. I did try earlier but simply didn’t feel comfortable so I stopped including it. The trouble is, just because something is listed as a deduction doesn’t mean it’s pre-tax. My pay stub lists Roth 401(k) contributions under deductions and they are, by definition, post-tax withholding’s.
       • Medical x number of paychecks withheld (24 or 26 if paid biweekly)
       • Vision x number of paychecks withheld (24 or 26 if paid biweekly)
       • Dental x number of paychecks withheld (24 or 26 if paid biweekly)
3. What’s your standard deduction?
   • I have never spent enough in the itemized category to make an itemized deduction worthwhile. Ergo, the standard deduction will be the minimal deduction you take. You just need to know which standard deduction applies to you.
     • Single
     • Married filing separately
     • Married filing jointly
     • qualifying surviving spouse
     • head of household
4. How much have you already put towards federal income tax already?
   • Get your most recent pay stub
   • Look in the taxes section
   • FIT or FITW stands for Federal Income Tax Withholding.
   • You want the number under YTD (Year to Date)

Take your Estimated Yearly Income and subtract the pre-tax and standard deductions you feel comfortable subtracting. I reduce it by retirement, total HSA, and the standard deduction. You have officially calculated your estimated remaining taxable income for the current year. I keep the answer to question four, how much I’ve paid toward taxes, to the side until I figure out what I owe in taxes.

We haven’t even figured out the taxes you will actually pay. I’m torn between trying to make an already long post a little shorter by making calculating your taxes another post. But that would just put more work on you. So this post is about to get a little longer. You may want to take a breather before moving onto the next step.

Did you grab some water? Nibble a piece of chocolate, or cheese, or some apple slices?

In the US we have a tiered tax, called the income tax brackets. I have copy and pasted the table for 2024 tax brackets found on Turbotax’s website. These tiers are supposed to be adjusted yearly to reflect inflation.

Tax Rate	Single filers	Married filing jointly or qualifying surviving spouse	Married filing separately	Head of household
10%	$0 to $11,600	$0 to $23,300	$0 to $11,600	$0 to $16,550
12%	$11,601 to $47,150	$23,301 to $94,300	$11,601 to $47,150	$16,551 to $63,100
22%	$47,151 to $100,525	$94,301 to $201,050	$47,151 to $100,525	$63,101 to $100,500
24%	$100,526 to $191,950	$201,051 to $383,900	$100,526 to $191,950	$100,501 to $191,950
32%	$191,951 to $243,725	$383,901 to $487,450	$191,951 to $243,725	$191,951 to $243,700
35%	$243,726 to $609,350	$487,451 to $731,200	$243,726 to $365,600	$243,701 to $609,350
37%	$609,351 or more	$731,201 or more	$365,601 or more	$609,351 or more

One of the most common misunderstandings is that all of a persons income will be taxed at the highest percentage. This isn’t right. If a single person makes $150,000 in taxable income they will not owe $36,000 of all their money (24%). To figure out the amount I will pay toward taxes I fill out the table below. For the record an income of $150,000 means this individual is a mere $3,000 from being upper class, the vast majority do not make this much money.

For example purposes this will be for a single filer who makes $150,000 taxable income. If you aren’t comfortable assuming anything is pre-tax and/or standard deductions then the taxable income is their gross income.

We always round up when figuring out what we owe and round down when figuring out what we get back.

Tax rate	Single filer brackets	Our filers income	Taxes owed in each tier
10%	$0 to $11,600	$11,600	$1,160
12%	$11,601 to $47,150	$35,550	$4,266
22%	$47,151 to $100,525	$53,375	$11,742.50
24%	$100,526 to $191,950	$49,475	$11,874
Total	——————	$150,000	$29,043 (rounded up from ($29,042.50)

How did I figure out the amount of money to place for each tax rate? Our pretend friend makes $150,000 so they will pay the full amount in the 10%, 12%, and 22% tier.

10% is the first $11,600 that they make.
12% is the next $35,550 that they make. $47,150-$11,600, because that $1 still counts.
22% is the next $53,375 that they make. $100,525-$47,150.
24% is 150,000 – the total already paid in the three previous brackets.

I’m sorry. I picked a nice round number to try and do the math and this person owes in taxes what most people survive off of for a year. I need a moment for that. Good luck to everyone trying to increase your income from our imaginary friends tax bill to their taxable income. I hope you get there.

Okay so we take our estimated tax bill and subtract the amount already paid into taxes. To try and get back to a round number let’s say our pretend friend has already paid $9,043 in taxes. That means they estimate they’ll have to pay an additional $20,000 this year.

Take the amount owed and divide by the number of checks left for the year. We’ll say 20 checks left.

$20,000 / 20 = $1,000 should be taken from every check for federal income taxes this year.

My math tax is a way to estimate federal taxes that would be owed for the year. There are many tax calculators you can find online. You can also seek the help of financial advisors, CPAs, or any individual that does do taxes for a living in order to find more accurate estimates. Any of these sources will be able to take into account credits, deductions, etc. that will impact your personal tax bill. If you are in a precarious financial situation I strongly urge you to find a person with greater knowledge of and experience in taxes.

P.S. If this was useful my one-page Sinking Funds Tracker is in the shop, or you can tip on Ko-fi or PayPal. One tiny move is progress.

This post reflects my personal experience and opinions. I share our real-life money – rounded numbers, personal choices, (tiny) next steps. It is not financial advice. I’m not a financial advisor. Budgeting and money topics are shared for education and entertainment only. Your situation is unique; verify details before acting. Small steps count.

Personal experiences only—this isn’t professional advice. See Disclosures and Terms.