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Let’s walk through a real-world example of a married couple living in Austin, Texas, filing jointly with one child. Their income sources and deductions create a fairly common tax scenario that many families can relate to. Here’s what their 2024 tax picture looks like:
The Financial Snapshot
- Residency: Austin, Texas (no state income tax)
- Filing Status: Married Filing Jointly
- One child, age 8 (qualifies for Child Tax Credit)
- W-2 Income: $130,000
- Federal Tax Withheld: $11,000
- Interest Income (CDs): $10,300
- Interest Income (U.S. Treasuries): $24,000
- Dividend Income: $1,000
- Short-Term Capital Gains: $4,000
- Long-Term Capital Gains: $0
- Social Security Income: $0
- Child Tax Credit: $2,000
1. Standard Deduction (2024)
- Federal Standard Deduction (Married Filing Jointly): $29,200
- Texas State Income Tax Deduction: $0 (Texas has no state income tax)
2. AGI vs. MAGI
- Adjusted Gross Income (AGI): $169,300
- Modified Adjusted Gross Income (MAGI): $169,300
Note: In this case, AGI and MAGI are the same because there are no deductions or exclusions that would change it.
3. Federal and State Tax Liability
- Federal Tax Liability: $13,398
- Federal Tax Withheld: $11,000
- Refund or Balance Due: Owe $2,398
- State Tax (Texas): $0
4. Tax Rates
- Marginal Tax Rate: 22%
- Effective Tax Rate: 7.9%
Marginal tax rate applies to the last dollar earned, while the effective rate reflects the average tax paid across all income.
This example illustrates how a typical middle-class family’s tax picture looks in 2024—even with various sources of investment income and a child tax credit. Understanding how income and deductions interact is key to effective tax planning.
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