March Madness Bracketology It’s Big Money

It’s March Madness, and it’s time to assess the bracketology for big money. Many Americans love watching March Madness basketball. It’s thrilling and heartbreaking at the same time. Win and you move on for the chance to win it all. Lose and your go home. What if I told you bracketology was about more than basketball? What if HouFIni revealed the true madness of bracketology for the win?

The Importance of Tax Bracketology

In early April, the NCAA will crown new men’s and women’s collegiate basketball champions. Joe Lunardi, is credited with inventing the term “Bracketology” and popularizing its use, to promote his work on college basketball bracket predictions.

But April also means taxes. Herein lies our distinction and why “tax bracketology” truly is big money. The importance of tax bracketology is not simply for bragging rights in March and April every year. The implications of tax bracketology have lifetime, and in some cases, generational money implications.

Like the college basketball season, tax bracketology starts long before March Madness Bracketology. Knowing the tax brackets for the current calendar year is an important first step.

2025 Tax Brackets For Single Filers

For 2025 tax season, to be filed by April 2025, the standard deduction will be $15,000 for single filers. For 2025, the standard deduction for married filing jointly will be $30,000. Since the change to simplify the tax code under the 2017 Tax Cuts and Jobs Act, the vast majority of Americans utilize the standard deduction.

Here’s a quick run down of the tax brackets for 2025 in two categories:

Tax Bracket Percentage	Single Filers 2025	Married Filing Jointly Filers 2025
10%	$0 to $11,925	$0 to $23,850
12%	$11,926 to $48,475	$23,851 to $96,950
22%	$48,476 to $103,350	$96,951 to $206,700
24%	$103,351 to $197,300	$206,701 to $394,600
32%	$197,301 to $250,525	$394,601 to $501,050
35%	$250,526 to $626,350	$501,051 to $751,600
37%	$626,351 or more	$751,601 or more

A Common Misperception About Tax Brackets

Some people will look at the tax bracket chart above and say I make $110,000 as a single person so I pay 24% in taxes. In fact, if you make $110,000 as a single filer you do not pay 24% in taxes. HouFIni, that’s crazy, the chart says I’m in the 24% tax bracket?

First, assuming you are utilizing the standard deduction, you would take $110,000 minus $15,000, thus you are taxed on $95,000 worth of income. Let’s say you have no other deductions. As a single filer with adjusted gross income of $95,000, you would pay 12% tax on your earnings up to $48,475. Additionally, you would pay 22% in taxes for every dollar over $48,476. Thus you effective tax rate is far less that a tax of 24% on your entire $110,000 annual income.

Knowing how to adjusted your income within the brackets is the winning strategy both now and for your future.

How Does Tax March Madness Bracketology Work?

HouFIni, please show me some tax bracketology magic. Let’s give another hypothetical example in which a single filers is earning $75,000 annually and living with some roommates. On it’s face, this single filer is in the 22% tax bracket. We are presuming this single filer uses the standard deduction of $15,000. Thus, $75,000 minus $15,000 decreases taxable income to $60,000.

Additionally, this single filer, being a young and healthy employee participates in their employer’s qualified High Deductible Heath Plan (HDHP). Because the HDHP qualifies, this single filer also participates in their employer Health Savings Account (HSA) with pre-tax dollars. Our single filer participates to the legal maximum of $4,300 annually; please note, this decision had to be made during the health qualifying period in late fall for an existing employee. Thus, the employees taxable income is reduced by $4,300. In this case, $60,000 minus $4,300 equals $55,700 in taxable income.

HouFIni, at $55,700, this single filer is still in the 22% tax bracket. HouFIni, these two examples are enough to get you past the first and maybe second round. HouFIni, “Show me the money,” as Tom Cruise says in the beloved sports movie Jerry McGuire.

Show Me The Money March Madness Bracketology

Here’s where our single filer becomes a game changing FIer. Living intentionally frugal, our single filer maximizes their 401(k) plan but does so strategically. For $2025, the maximum 401(k), 403(b) or 401(k) Roth or 403(b) Roth is $23,000 if you are under the age of 50. Our single filer, is going to max out retirement account access. In this case, the single filer is contributing $7,230 in their 401(k) which makes their taxable income $55,700 minus $7,230 equaling $48,470. In 2025, a single filer with taxable income of $48, 470 is in the 12% tax bracket rather than the 22% percent tax bracket. This is cold hard cash. HouFIni calls this Sweet Sixteen level tax madness.

But the magic gets even better. HouFIni, how is there even more magic? Because our single filer is contributing an additional $15,770 to their employer Roth 401(k). It’s true that our single filer pays taxes of 12% on this $15,770 going into the Roth 401(k). However, 12% tax is a low tax rate and the portion of the funds within the Roth 401(k) funds grow tax free. This means, when this single filer, our future FIer removes these funds after five years and is over the age of 59 and a half, the growth will be tax-free. This tax-free growth is Elite Eight or Final Four level tax bracketology bracketology.

Sweeting Post Tax Madness

HouFIni also believes in next level post-tax madness. As an under 50 year old, our single filer, also is participating in an after-tax Roth IRA. The maximum Roth IRA contribution, separate from your employer retirement plan, is $7,000 if you are under age 50. Again, these funds need to be in the Roth account for 5 years and the growth is after-tax after age 59 and a half when you remove the funds.

Stringing together multiple years of this game-changing behavior leads to championship level FI.

Family FI Bracketology

Even when we, as mother mother would say, “did not have a pot to piss in,” we tried living on one income as a couple and family. Paying ourselves first is something I learned from my own parents. Paying ourselves first has been game changing in our journey to FI. It’s a big reason why we are 89 Months away from our 100 month journey to FI.

Understanding how to manipulate are tax bracketology is key to our Family FI strategy. Indeed, while we pay our fair share in taxes and do not do anything outside of the tax lines. We have long been utilizing contribution maximums as part of our HouFIni magic. Indeed, FI is not only for the tech bros.

In a hypothetical example, let’s say our Family FI married filing jointly filers have a combined income of $130,000 annually. Luckily, the married filing jointly standard deduction for 2025 is $30,000. Calculating $130,000 minus $30,000 leaves $100,000 in taxable income or the 22% tax bracket.

Using Maximums to Lower Your Taxable Income

Again, one member of this family has access to an employer sponsored HDHP. This qualifying HDHP, and accompanying work HSA allows them to contribute the maximum. For 2025, this family is contributing the maximum of $8,550. In this case, $100,000 in annual income minus $8,550 max for the HSA equals $91,450. This maneuver alone has already dropped our Family filers into the 12% tax bracket.

Additionally, our couple participates in their 401(k) and 403(b) employee retirement plans. Each spouse contributes the maximum of $23,000 since they are under the age of 50. In this case, $91,450 minus $46,000 is $45,450 since they want to pay as little tax as possible. Double bonus, our hypothetical couple each contributes $7,000 since they are under age 50 to their after tax Roth IRA’s. Maximizing after tax Roth IRA contributions means funds need to be in the Roth account for 5 years. However, the Roth IRA growth is after-tax and can be withdrawn at age 59 and a half after five years., under most circumstances. If possible, and a Roth 401(k) or Roth 403(b) is accessible, it may make more sense for our hypothetical couple to pay the relatively low tax rate within the 12% tax bracket.

Pro Tip Unlocking the Magic of 457(b) Plans

If you qualify, and can double down on your money mindset, contributing to a 457(b) Plan is a near lock to advance your tax bracketology. To learn more about the March Madness Bracketology power of the 457(b) check out this pro tip.

How to Best Inflation? Consciousness Grows Faster Than Inflation

Tax Bracketology Could Be Changing in 2026

A word to the wise, the 2017 Tax Cut and Jobs Act (TCJA) expires at the end of 2025. HouFIni, why is caring about the TCJA important to me?

If Congress does not act this year on a new tax bill, most Americans will be back in higher tax brackets. Back in 2017, the tax brackets were based on the following rates: 10%, 15%, 25%, 28%, 33%, 35%, and 39.6%. Under the TCJA the tax brackets are based on the following rates: 10%, 12%, 22%, 24%, 32%, 35%, and 37%.

Here is a side-by-side comparison of the tax brackets and rates for single filers from 2017 versus 2018:

Tax Bracket Percentage 2017	2017 Single Filer Tax Bracket	Tax Bracket Percentage 2018	2018 Single Filer Tax Bracket
10%	$0 to $9,325	10%	$0 to $9,525
15%	$9,326 to $37,950	12%	$9,526 to $38,700
25%	$37,951 to $91,900	22%	$38,701 to $82,500
28%	$91,901 to $191,650	24%	$82,501 to $157,500
33%	$191,651 to $416,700	32%	$157,501 to $200,000
35%	$416,701 to $418,400	35%	$200,001 to $500,000
39.60%	over $418,000	37%	over $500,000

There are major differences between the actual percentage of tax and how the tax brackets are broken down within these percentages. Just to be clear, taxes will not go back to the income breakouts listed in 2017. However, if Congress does not act, the tax percentages would revert back.

HouFIni, Why is the TCJA Important?

Congress will likely pass a tax bill at some point in 2025. In fact, passing a tax bill would have been a priority for Congress no matter who became president or which party controlled Congress. Simply, the expiration of the TCJA at the end of 2025 is the motivating factor for Congressional action.

In putting together a tax bill, Congress will be examining all sorts of tax provisions. Congress is choosing to extend, eliminate, or modify various tax provisions. Tax areas beyond bracketology including Affordable Care Act tax credits, estate tax provisions, state and local tax deductions, etc. are on the table.

HouFIni will be providing updates so that my fellow FIers understand how March Madness Bracketology tax areas may be impacted.

*Disclaimer: The content on this video, website, podcast and any blog posts are not intended to be investment or life advice. Readers should consult with their legal, financial, and accounting specialists and spiritual and/or life coaches to provide insight on their personal and specific circumstances as each situation is unique. The videos, website, podcast and any blog posts are written for entertainment purposes only.