Nobody enjoys paying taxes, but ignoring them can cost you thousands of dollars over your lifetime. The truth is, taxes are one of the biggest expenses you’ll ever have—possibly bigger than rent, groceries, or even student loans. Yet, most people don’t take the time to understand how taxes really work.
Think about it this way:
- If you earned $80,000/year, you might be paying $15,000+ in taxes annually.
- That’s $1.2 million in taxes over a 40-year career!
What if you could legally reduce your tax bill by even 10%?
That’s an extra $120,000 in your pocket over time. Taxes aren’t just about filling out forms in April—they’re a crucial part of managing your money year-round.
Whether you’re a 9-to-5 employee, a freelancer, or a business owner, understanding taxes can help you:
Keep more of what you earn 
Avoid penalties and mistakes 
Maximize deductions and credits 
Invest tax-efficiently for long-term wealth 
And the best part? You don’t need to be a tax expert to take advantage of the system—just a little knowledge can make a huge difference.
How Tax Brackets Actually Work: Why Earning More Doesn’t Always Mean Higher Taxes
One of the biggest tax myths is that if you make more money, you’ll suddenly be taxed at a much higher rate and take home less money. That’s not how tax brackets work—so let’s clear this up.
The U.S. Uses a Progressive Tax System
This means your income is divided into different brackets, and each portion is taxed at a different rate. You’re not taxed all at one rate—only the part of your income that falls into each bracket gets taxed at that rate.
Here’s the 2024 federal tax bracket for single filers:
| Taxable Income | Tax Rate |
|---|---|
| $0 – $11,600 | 10% |
| $11,601 – $47,150 | 12% |
| $47,151 – $100,525 | 22% |
| $100,526 – $191,950 | 24% |
| $191,951 – $243,725 | 32% |
| $243,726 – $609,350 | 35% |
| $609,351+ | 37% |
Example: How It Works in Real Life
Let’s say you earn $60,000 per year. You’re not taxed at one single rate—your income is taxed in chunks:
- The first $11,600 is taxed at 10% → $1,160
- The next $35,549 ($47,150 – $11,601) is taxed at 12% → $4,266
- The final $12,850 ($60,000 – $47,150) is taxed at 22% → $2,827
Total federal tax owed: $8,253
Your actual tax rate? 13.8%—not 22%!
What Happens if You Get a Raise?
Let’s say you get a $5,000 raise and now make $65,000. That extra $5,000 does not push your entire income into a higher tax rate.
Instead:
- Your first $60,000 is taxed exactly the same as before.
- Only the extra $5,000 is taxed at 22% → $1,100 more in taxes.
- You still take home an extra $3,900 after taxes.
Myth Busted: Getting a raise never means you take home less money—only a small portion gets taxed at a higher rate.
Tax Deductions Millennials Often Miss: How to Keep More of Your Money
Every year, millions of Americans overpay their taxes simply because they don’t take advantage of deductions. A tax deduction lowers your taxable income, which means you pay less in taxes. But many people miss out on valuable deductions that could save them hundreds—or even thousands—of dollars.
Let’s break down some of the most overlooked tax deductions millennials should know about:
1. Student Loan Interest Deduction 
If you’re paying off student loans, you can deduct up to $2,500 in interest paid per year. This is an above-the-line deduction, meaning you can claim it even if you don’t itemize.
Example: If you paid $2,000 in student loan interest, and you’re in the 22% tax bracket, you’d save $440 on your taxes.
Who qualifies? You paid student loan interest in the tax year. Your income is below $90,000 (single) or $180,000 (married filing jointly). The loan was for you, your spouse, or a dependent.
2. Home Office Deduction 
(For Side Hustlers & Freelancers)
If you work from home for yourself, you may be able to deduct part of your rent, utilities, and internet costs.
How it works:
- If your home office takes up 10% of your apartment, you can deduct 10% of your rent, utilities, and internet costs.
- The space must be used exclusively for work—your couch doesn’t count.
Who qualifies? Self-employed workers, freelancers, and gig workers.
W-2 employees don’t qualify—even if you work remotely.
3. Side Hustle & Business Expenses 
If you run a side hustle (Etsy shop, Uber, consulting, etc.), you can deduct many business-related expenses, such as:
Website costs (domain, hosting, software like Canva or Adobe) Marketing and advertising Equipment and supplies Gas and mileage (if used for business)
Example: If you make $5,000 from your side hustle but have $1,000 in business expenses, you’re only taxed on $4,000—saving you $220+ in a 22% tax bracket.
Who qualifies? Anyone with self-employment income or a side hustle.
4. Retirement Contributions (401k & IRA)
Contributions to a traditional 401(k) or IRA lower your taxable income—meaning you pay less tax now while saving for retirement.
2024 Contribution Limits:
- 401(k): Up to $23,000 per year ($30,500 if you’re 50+).
- Traditional IRA: Up to $7,000 per year ($8,000 if you’re 50+).
Who qualifies? Anyone contributing to a traditional retirement account.
5. Medical Expenses 
(If They’re High Enough)
If your medical expenses exceed 7.5% of your income, you can deduct them if you itemize deductions.
What counts? Doctor visits, prescriptions, surgeries Dental and vision care Therapy and mental health services Health insurance premiums (if not covered by an employer)
Who qualifies? Those with high medical costs relative to income.
6. Educator Expenses (For Teachers 
)
If you’re a teacher, you can deduct up to $300 for classroom supplies even if you don’t itemize.
Who qualifies? K-12 teachers, instructors, counselors, principals, and aides.
7. State Sales Tax Deduction (For Big Purchases) 
If you made a big purchase (like a car or furniture), you can deduct the sales tax paid instead of state income tax.
Who qualifies? Anyone in a state with no income tax (Florida, Texas, Nevada, etc.). Those who made a big purchase with high sales tax.
How to Claim These Deductions 
Some deductions require you to itemize (meaning you don’t take the standard deduction), while others—like student loan interest and retirement contributions—can be taken even if you take the standard deduction.
Not sure what applies to you? A tax software like TurboTax or a CPA can help ensure you don’t miss any savings.
Bottom line: Taking advantage of tax deductions means keeping more of your hard-earned money instead of overpaying the government.
Should You Do Your Own Taxes or Hire a Pro? When TurboTax Isn’t Enough
Many people assume that filing taxes is as simple as using TurboTax or another online software. But depending on your financial situation, doing your own taxes might be costing you money—or worse, leading to costly mistakes.
So, when is DIY tax filing a good idea, and when should you hire a pro? Let’s break it down.
When DIY Tax Filing Works Best 
If your tax situation is simple, using tax software (or even filing for free) is usually fine. Here are cases where you can confidently file on your own:
You have only W-2 income – If you work a standard 9-5 job and get a W-2 form, filing is straightforward.
You take the standard deduction
In 2024, the standard deduction is:
- $14,600 for single filers
- $29,200 for married couples filing jointly
- If you don’t have enough deductions to itemize, the standard deduction makes filing easier.
You have a side hustle but minimal expenses – If you made some extra money from a freelance gig or side hustle without major expenses, tax software can handle it.
You qualify for free tax filing – The IRS offers Free File for individuals making under $79,000 per year. Many tax software providers also offer free versions for simple returns.
When You Should Hire a Tax Professional 
If any of the following apply, hiring a tax expert could save you money and headaches:
You’re self-employed or own a business – If you’re a freelancer, contractor, or small business owner, taxes get complex fast. A CPA can:
- Maximize deductions for business expenses
- Handle quarterly estimated tax payments
- Help you avoid an audit
You have significant investments (stocks, crypto, real estate) – Selling stocks or crypto triggers capital gains taxes. A tax pro can help minimize your tax bill with strategies like tax-loss harvesting.
You bought/sold a home last year – Home transactions have tax implications, especially if you made a profit or refinanced.
You have rental income or multiple income streams – Owning a rental property means dealing with:
- Depreciation deductions
- Mortgage interest write-offs
- Self-employment tax for Airbnb income
You had a major life event – If you:
Got married or divorced Had a baby Inherited money or property Moved to a new state
…you might benefit from professional tax advice.
You’re being audited (or want to avoid one) – If the IRS is asking questions, don’t DIY it—hire a pro.
How Much Does a Tax Professional Cost?
Average costs for tax prep:
- Basic return (W-2, no itemizing): $220 – $300
- Itemized return: $300 – $500
- Self-employed/small business taxes: $500 – $1,500
A good tax professional can save you more than they cost by finding deductions and avoiding penalties.
Where to Find a Good Tax Pro
- CPA or Enrolled Agent (EA) – Best for complex returns. Search via IRS Directory of Tax Preparers.
- Local Tax Firms – Many small accounting firms offer affordable, personalized service.
- Tax Attorneys – If you have legal tax issues, a tax lawyer is best.
Final Verdict: DIY or Hire a Pro?
| Situation | DIY with TurboTax | Hire a Tax Pro |
|---|---|---|
| Simple W-2 income | |
|
| Standard deduction | |
|
| Freelance income under $5,000 | |
|
| Self-employed/business owner | |
|
| Crypto/stock investments | |
|
| Rental property owner | |
|
| Audit or IRS issues | |
|
| Big life changes (marriage, baby, etc.) | |
|
Bottom line: If your taxes are basic, DIY is fine. But if you have a complicated financial situation, a tax pro could save you thousands.
Side Hustles and Taxes: What Freelancers and Gig Workers Need to Know
Side hustles and freelancing can be great ways to earn extra income, but they also come with tax responsibilities that W-2 employees don’t have to worry about. If you’re making money from a side gig—whether it’s Uber, Etsy, consulting, or freelance work—you need to understand how taxes work so you don’t get hit with unexpected bills or penalties.
1. Your Side Hustle Income Is Taxable (Even If You Don’t Get a 1099)
If you make more than $400 from self-employment, the IRS considers you a business owner, and you must report it on your tax return.
If a client or platform pays you more than $600, you’ll likely get a 1099-NEC or 1099-K form showing your earnings.
Even if you don’t receive a 1099, you must still report your income—the IRS doesn’t care if it was cash, Venmo, or PayPal.
If you sell products (Etsy, eBay, Amazon FBA), profits are taxable—even if it’s just a hobby.
Common Side Hustles That Require Tax Reporting:
- Freelance work (writing, graphic design, consulting)
- Driving for Uber, Lyft, DoorDash
- Selling on Etsy, eBay, Poshmark, Amazon
- Tutoring, coaching, or online courses
- Photography, blogging, or social media influencing
Key Takeaway: If you’re making money on the side, the IRS expects you to report it—no matter how small.
2. You Have to Pay Self-Employment Taxes (But You Can Reduce Them)
As a self-employed worker, you are responsible for paying both the employer AND employee portion of Social Security and Medicare taxes—this is called self-employment tax.
W-2 employees only pay 7.65% (their employer covers the other half). Self-employed workers pay 15.3% in self-employment tax on top of income tax.
Example:
If you earn $10,000 from freelancing, you’ll owe $1,530 in self-employment tax plus income tax.
How to Reduce Your Tax Bill: Deduct business expenses (see next section). Open a retirement account (like a SEP IRA) to lower taxable income. Pay estimated taxes quarterly to avoid penalties.
3. Deduct Your Business Expenses to Pay Less in Taxes 
One of the biggest tax advantages of freelancing is the ability to write off business expenses—meaning you only pay tax on your profits, not your total income.
Common Side Hustle Tax Deductions:
| Expense | What You Can Deduct |
|---|---|
| Home Office | A portion of your rent, utilities, and internet if used for work. |
| Supplies & Equipment | Laptop, phone, camera, office chair, etc. |
| Software & Subscriptions | Adobe, Canva, Zoom, Shopify, website hosting. |
| Marketing & Advertising | Facebook ads, email marketing tools, business cards. |
| Mileage & Travel | Gas, Uber rides, flights, hotels (if business-related). |
| Meals (50% deduction) | Business lunches or client meetings. |
Example:
If you earned $20,000 but spent $5,000 on business expenses, you’re only taxed on $15,000—saving you hundreds or even thousands in taxes.
Key Takeaway: Keep detailed records of your expenses (use apps like QuickBooks Self-Employed or Expensify).
4. You Might Need to Pay Estimated Taxes (Quarterly) 
Unlike W-2 employees, freelancers don’t have taxes automatically taken out of their paycheck—so you may need to pay estimated taxes every quarter to avoid penalties.
Who Needs to Pay Quarterly Taxes?
If you expect to owe more than $1,000 in taxes for the year, the IRS wants you to pay every 3 months.
Due Dates for 2024 Estimated Taxes:
| Quarter | Income Earned | Payment Due Date |
|---|---|---|
| Q1 | January – March | April 15, 2024 |
| Q2 | April – June | June 17, 2024 |
| Q3 | July – September | September 16, 2024 |
| Q4 | October – December | January 15, 2025 |
How to Calculate & Pay Estimated Taxes:
- Use the IRS Form 1040-ES to estimate how much you owe.
- Pay online at IRS.gov/payments.
- If you overpay, you’ll get a refund when you file your taxes.
Key Takeaway: If you freelance full-time or have a high-earning side hustle, paying taxes quarterly helps you avoid a big tax bill in April.
5. Use a Tax-Advantaged Retirement Account to Lower Your Taxes
Freelancers and self-employed workers don’t have a 401(k) from an employer—but you can set up your own retirement account and get huge tax breaks.
Best Retirement Accounts for Freelancers:
| Plan Type | Annual Contribution Limit (2024) | Tax Benefit |
|---|---|---|
| Traditional IRA | $7,000 ($8,000 if 50+) | Tax deduction now, taxed later |
| Roth IRA | $7,000 ($8,000 if 50+) | Tax-free growth & withdrawals |
| SEP IRA | Up to 25% of net earnings (max $69,000) | Big tax deductions for high earners |
| Solo 401(k) | $23,000 ($30,500 if 50+) | Similar to employer 401(k), great for high earners |
Example: If you make $50,000 freelancing and contribute $10,000 to a SEP IRA, you’re only taxed on $40,000—saving you $2,200+ in a 22% tax bracket.
Key Takeaway: Investing in a tax-advantaged retirement account is one of the best ways to keep more of your freelance income.
How to Legally Pay Less in Taxes: Retirement Accounts, HSAs, and Other Tax Shelters
Nobody likes paying taxes, but the wealthy pay less because they use tax-saving strategies that are completely legal. You don’t need to be rich to do the same—just knowing how to use tax shelters like retirement accounts, Health Savings Accounts (HSAs), and deductions can cut your tax bill significantly.
Let’s break down smart ways to keep more of your money legally.
1. Maximize Tax-Advantaged Retirement Accounts (401(k)s & IRAs)
Retirement accounts are one of the easiest ways to reduce your taxable income. Money you contribute is either:
- Tax-deductible now (Traditional 401(k) & IRA)
- Tax-free later (Roth IRA & Roth 401(k))
How Much Can You Contribute in 2024?
| Retirement Account | Max Contribution (Under 50) | Max Contribution (50+) | Tax Benefit |
|---|---|---|---|
| 401(k) | $23,000 | $30,500 | Reduces taxable income now |
| Roth 401(k) | $23,000 | $30,500 | No tax now, tax-free withdrawals later |
| Traditional IRA | $7,000 | $8,000 | Reduces taxable income now |
| Roth IRA | $7,000 | $8,000 | No tax now, tax-free withdrawals later |
Example: If you make $60,000 and contribute $10,000 to a 401(k), you’re only taxed on $50,000—potentially saving $2,200+ in a 22% tax bracket.
Key Takeaway: If your employer offers a 401(k) match, contribute at least enough to get the full match—it’s free money.
2. Use an HSA (Health Savings Account) for Triple Tax Savings 
A Health Savings Account (HSA) is one of the best tax shelters because it offers three tax benefits:
Tax-deductible contributions (lowers taxable income) Tax-free investment growth Tax-free withdrawals for medical expenses
2024 HSA Contribution Limits
| Filing Status | Max Contribution |
|---|---|
| Single | $4,150 |
| Family | $8,300 |
| 50+ Catch-Up | +$1,000 |
Example: If you make $50,000 and contribute $4,150 to an HSA, you only get taxed on $45,850—potentially saving $900+ in taxes.
Who Qualifies?
- You must have a high-deductible health plan (HDHP) to contribute.
- Funds never expire—you can save them for future medical costs or even retirement.
3. Take Advantage of Tax-Free Capital Gains (If You Invest Smart)
If you buy and hold stocks, ETFs, or real estate for over a year, you qualify for lower tax rates on capital gains (compared to regular income).
Capital Gains Tax Rates (2024)
| Income Level (Single) | Tax Rate on Long-Term Gains |
|---|---|
| $0 – $44,625 | 0% (tax-free) |
| $44,626 – $492,300 | 15% |
| Over $492,300 | 20% |
Example: If you make $40,000/year, you could sell stocks and pay 0% tax on the gains (as long as they were held for over a year).
Key Takeaway: If you’re in a low-income year, consider selling long-term investments tax-free.
4. Use Tax-Loss Harvesting to Pay Less on Investments 
If you have losing investments, you can sell them to offset gains or even regular income—this is called tax-loss harvesting.
How It Works:
Sell a stock or ETF at a loss (e.g., you lost $5,000 on a bad investment).
- You can use that $5,000 loss to offset gains on other stocks or even up to $3,000 of regular income per year.
- If you have more losses than you can use, you can carry them forward to future years.
Key Takeaway: If you’re holding losing stocks, don’t panic—use them to reduce your taxes.
5. Deduct Mortgage Interest and Property Taxes (If You Own a Home)
Owning a home comes with big tax benefits. If you itemize your deductions, you can deduct: Mortgage interest (on loans up to $750,000) Property taxes (up to $10,000)
Example: If you pay $12,000 per year in mortgage interest, you can deduct that from your taxable income—potentially saving $2,600+ in a 22% tax bracket.
Key Takeaway: If you own a home, check if itemizing saves you more than taking the standard deduction.
6. Set Up a Side Hustle (Even for Small Tax Breaks)
Starting a small business or side hustle gives you access to tons of tax deductions that regular employees don’t get.
Home office deduction (a percentage of your rent, utilities, internet) Business expenses (laptop, software, advertising, supplies) Travel & meals (if related to business)
Example: If you earn $5,000 from a side hustle but have $2,000 in business expenses, you’re only taxed on $3,000—potentially saving you $500+.
Key Takeaway: Even a small side business can give you major tax breaks.
7. Move to a No-Income-Tax State (Extreme But Effective) 
If you live in a high-tax state (California, New York, Illinois), you could save thousands per year by moving to a no-income-tax state like:
- Texas
- Florida
- Nevada
- Tennessee
- Washington
Example:
- If you earn $80,000 in California, you’ll pay ~$6,000 in state income tax.
- If you move to Texas, you pay $0 in state tax—that’s $6,000 saved per year!
Key Takeaway: If you work remotely, consider relocating to a tax-friendly state.
A Tax Strategy That Puts More Money in Your Pocket
Taxes may be unavoidable, but overpaying is optional. The wealthy use tax laws to keep more of what they earn—and now, so can you.
By taking advantage of deductions, tax-advantaged accounts, and smart planning, you can cut your tax bill, invest more, and build long-term wealth faster.
Your Simple Tax Strategy for Keeping More Money:
1. Reduce Taxable Income Contribute to a 401(k), IRA, or HSA to lower your taxable income. Deduct student loan interest, home office expenses, and side hustle costs. Use tax-loss harvesting to offset investment gains.
2. Maximize Tax-Free Wealth Growth Invest in a Roth IRA or Roth 401(k) for tax-free retirement withdrawals. Hold investments for over a year to get lower capital gains tax rates. Use an HSA for tax-free medical expenses—even decades later.
3. Avoid Overpaying on Taxes If self-employed, deduct every business expense possible. Check if itemizing deductions saves you more than the standard deduction. If your income is high, consider moving to a tax-free state.
Final Takeaway: Small Tax Moves = Big Lifetime Savings
Even saving $2,000 a year on taxes could mean an extra $100,000+ in retirement, thanks to compound growth.
The key to paying less in taxes isn’t cheating the system—it’s understanding it. With a little planning and the right strategies, you’ll keep more of your hard-earned money and reach financial freedom faster.
Now, go out there and take control of your taxes like a pro! 
