Financial Education · Tax Strategy

Taxes

The IRS doesn't remind you about deductions. It doesn't flag credits you're eligible for. It collects what you report and cashes your check. Most people in their 20s significantly overpay — not through dishonesty, but through not knowing what they don't know. Understanding how tax brackets actually work (not how most people think they work), what deductions you're entitled to, and how account types affect your lifetime tax bill is one of the highest-ROI moves you can make early.

What it covers

Tax brackets are marginal — your entire income isn't taxed at the highest rate you hit, only the portion above each threshold. A W-2 comes from an employer and has taxes withheld throughout the year. A 1099 means you're responsible for your own taxes, including self-employment tax on top of income tax. Deductions reduce your taxable income: the standard deduction ($14,600 for single filers in 2024) vs. itemized deductions like mortgage interest and charitable contributions. Tax-advantaged accounts — traditional 401(k)s (pre-tax contributions, taxed on withdrawal) and Roth IRAs (post-tax contributions, tax-free growth) — are among the most powerful tools in personal finance and most people under 30 are underusing them.

Why it matters

If you earn $75,000 and don't optimize, you could pay $12,000 or more in federal income tax. Contribute to a 401(k), fund an IRA, and understand your deductions, and that number drops meaningfully — legally. Every dollar contributed to a traditional 401(k) reduces your taxable income right now. Every dollar in a Roth IRA grows tax-free for decades. The difference between someone who understands this at 23 vs. 35 is potentially six figures by retirement. The tax code rewards people who understand it. Everyone else funds the difference.

Key terms

Marginal Tax Rate

The tax rate applied to the next dollar you earn — not your entire income. If you're in the 22% bracket, only the dollars above the 12% threshold are taxed at 22%. The dollars below are still taxed at lower rates.

Standard Deduction

A fixed amount that reduces your taxable income without itemizing expenses. $14,600 for single filers in 2024. Most people under 30 take this rather than itemizing because it's larger than their qualifying itemized deductions.

W-2

A tax form from your employer showing annual wages and taxes already withheld from your paychecks. If enough was withheld throughout the year, you get a refund when you file. If not enough, you owe the difference.

1099

A tax form for income earned without employer withholding — freelance work, gig economy income, investment dividends. You owe both the employee and employer portions of Social Security and Medicare taxes on 1099 income.

Pre-Tax vs. Post-Tax

Pre-tax contributions (like a traditional 401k) reduce your taxable income today; you pay taxes on the money when you withdraw it. Post-tax contributions (like a Roth IRA) are taxed now, but all future growth and withdrawals are tax-free.

How GenHedge connects

Tax strategy connects directly to market activity. Capital gains taxes apply when you sell investments at a profit — and the rate depends on how long you held them. Dividend income is taxable. Every crypto transaction is a taxable event. Understanding the tax implications of market moves makes you a smarter investor, not just a more informed one. The macro and investing signals in the daily newsletter have real tax implications if you act on them.