• Discounts and special offers
  • Subscriber-only articles and interviews
  • Breaking news and trending topics

Already a subscriber?

By signing up, you accept Moneywise's Terms of Use, Subscription Agreement, and Privacy Policy.

Not interested ?

Her tax bill

WestCoastFairy’s tax bill isn’t actually that out-of-whack. In fact, her accountant probably did quite a bit of handiwork to get it reduced.

For the 2023 tax year, tax payers are charged different federal tax brackets for each part of their income. For WestCoastFairy's $100,000, that means she falls into four tax brackets: 10% on her first $11,000, 12% from $11,001 to $44,725, 22% on $44,726 to $95,375 and 24% from $95,376 to $100,000.

This means that she ends up paying a tax bracket of around 17%, where she would owe approximately $17,399.42 in federal taxes. Her $18,000 federal tax bill is in line with this number.

The California tax rate can be a bit more complex to figure out, but it would probably come in at a rate of 9.3% for $100,000 income (around $9,300). So, her $8,000 state tax bill adds up.

As one commenter says about WestCoastFairy’s tax bill: “Sounds like a bargain.”

Kiss Your Credit Card Debt Goodbye

Millions of Americans are struggling to crawl out of debt in the face of record-high interest rates. A personal loan offers lower interest rates and fixed payments, making it a smart choice to consolidate high-interest credit card debt. It helps save money, simplifies payments, and accelerates debt payoff. Credible is a free online service that shows you the best lending options to pay off your credit card debt fast — and save a ton in interest.

Explore better rates

30% rule

However, the reason that WestCoastFairy is reduced to tears in her video is not because she has to pay the bill. It’s because she thought she knew how much she’d have to pay and saved for that specific (albeit incorrect) amount.

As many commenters point out, a good way to avoid this situation is to save 30% off each paycheck. Even personal finance celebrity Dave Ramsey backs this advice for individual contractors or business owners like WestCoastFairy.

If WestCoastFairy had put aside 30% of her income, she would have $30,000 saved — $4,000 more than what she needs to pay off her tax bill.

It’s pretty common for people like WestCoastFairy to not know how much to set aside for taxes when they start their own businesses or independent contract work. Anyone with an employer has tax taken off their paycheck without them even knowing. So, it’s quite an adjustment.

The fact that WestCoastFairy already started taking money aside every month to pay off her taxes is a good start — she just needs to put aside a bit more for next year.

Health write-offs are key

WestCoastFairy is stunned by her tax bill because she paid around $10,000 for health insurance and another $10,000 for out-of-pocket health costs, including an ER trip and prescription drugs.

She says none of these expenses count toward a tax deduction.

As commenters point out, a health-savings account (HSA) would offset these costs and lower her tax bill.

An HSA is a type of savings account that allows you to set aside money for certain medical expenses. If you have an employer-sponsored HSA, you’re able to stow away money and withdraw it tax-free, as long as it goes toward qualified expenses.

There is a maximum amount that you can put in your HSA every year. The 2024 maximum amount is $4,150 for an individual and $8,300 for a family, according to the IRS.


This 2 Minute Move Could Knock $500/Year off Your Car Insurance in 2024

Saving money on car insurance with BestMoney is a simple way to reduce your expenses. You’ll often get the same, or even better, insurance for less than what you’re paying right now.

There’s no reason not to at least try this free service. Check out BestMoney today, and take a turn in the right direction.

Sabina Wex is a writer and podcast producer in Toronto. Her work has appeared in Business Insider, Fast Company, CBC and more.


The content provided on Moneywise is information to help users become financially literate. It is neither tax nor legal advice, is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. Tax, investment and all other decisions should be made, as appropriate, only with guidance from a qualified professional. We make no representation or warranty of any kind, either express or implied, with respect to the data provided, the timeliness thereof, the results to be obtained by the use thereof or any other matter. Advertisers are not responsible for the content of this site, including any editorials or reviews that may appear on this site. For complete and current information on any advertiser product, please visit their website.