Federal/IRS Tax Guide for 2024

The federal income tax system uses a progressive tax structure with 7 tax brackets, ranging from 10% to 37%. This means higher portions of your income are taxed at higher rates as your income increases. Long-term capital gains (assets held for more than one year) are taxed at preferential rates of 0%, 15%, or 20%, depending on your income level. Short-term capital gains are taxed as ordinary income.

The standard deduction is $14,600 for single filers and $29,200 for married couples filing jointly, which reduces your taxable income.

In addition to income tax, employees pay 6.2% in Social Security tax (on wages up to $168,600) and 1.45% in Medicare tax on all wages. High earners pay an additional 0.9% Medicare tax on wages above $200,001 for single filers and $250,001 for married filers.

Various tax credits are available to reduce your tax liability, including the Child Tax Credit (up to $2,000 per child), Earned Income Tax Credit, and education credits.