The United States has a progressive tax system. The more you earn, the more you pay. Here is a brief overview…

Marginal tax rate is the rate paid on your final dollar of taxable income. Synonymous with your highest tax bracket.

Effective tax rate is where we should focus. This is the percentage of your total income paid in taxes. Consider this as the average rate. The rate taken out of each and every dollar.

Both rates may be lowered with the help of tax deductions. These reduce the amount of taxable income. Most notable is the standard deduction. The 2023 standard deduction is $13,850 for single filers and $27,700 for married folks filing jointly. In 2024, these will increase to $14,600 and $29,200 for single and joint filers respectively.

Some taxpayers may itemize their deductions if they have significant property taxes, mortgage payments, or charitable contributions. Consult your CPA for details on itemizing. Mrs. TFC and I take the standard deduction.

There are a couple other avenues of tax deductions. Think traditional 401(k), Health Savings Account and traditional IRA. The contributions to these accounts will save the amount of your highest tax bracket.

A single filing CRNA invests the 2023 maximum of $22,500 into a 401(k), $3,850 into an HSA, and $6,500 into an IRA for a total of $32,850 of tax deferred investments. For an average earning CRNA, that $26,350 would have been taxed at 32% which equates to $10,512 in savings. Even more with catch-up contributions.

Tax credits are even more amazing. They are a dollar-for-dollar reduction meaning this amount comes directly off your tax bill. You may have heard of a few of these such as the child tax credit, lifetime learning credit, or electric vehicle credit. Each have a unique set of criteria to qualify.

If you are a high earning CRNA, you may not qualify for most of these.

Taxes are a CRNA’s greatest expense, so might as well have a look at the magnitude of that expense. Feast your eyes on the 2023 bracket that you will use in the next few months. And the 2024 bracket, which will be used on next year’s earnings.

Here we go with the 2023 bracket…

And what you have to look forward to in 2024…

As always, thanks for reading.