US Tax Brackets Explained: Marginal vs Effective

The US uses progressive tax brackets, which means your income is taxed in slices. Only the dollars that fall inside each bracket are taxed at that bracket’s rate. Your marginal rate is the rate on your last dollar, the top bracket you reach. Your effective rate is your total tax divided by your total income, and it is always lower. Moving into a higher bracket does not tax all of your income at that higher rate.

How US Tax Brackets Work: Marginal vs Effective

The short answer is that the federal income tax is progressive. Your taxable income is divided into slices, and each slice is taxed at the rate for the bracket it lands in. The first slice is taxed at the lowest rate, the next slice at the next rate up, and so on. Because of this design, two numbers describe your tax, and they are not the same. Your marginal rate is the rate applied to your last dollar, meaning the highest bracket your income reaches. Your effective rate is the total tax you owe divided by your total income.

These two rates answer different questions. The marginal rate tells you what the next dollar you earn, or the next dollar you shelter, is taxed at. The effective rate tells you the overall share of your income that went to tax. The effective rate is always lower than the marginal rate, because only your top slice is taxed at the marginal rate while everything below it is taxed at lower rates. If you want to see how these rates shape your paycheck, the Salary Calculator can translate a gross salary into an estimated take-home figure.

Progressive Brackets: Your Income Is Taxed In Slices

The most common misunderstanding about brackets is the belief that landing in the 22 percent bracket means 22 percent of everything you earn goes to federal income tax. That is not how it works. The rate for a bracket applies only to the dollars that fall inside that bracket’s range, not to the dollars below it.

Picture your taxable income as a tall stack filled from the bottom up. The bottom layer is taxed at 10 percent. Once that layer is full, the next layer is taxed at 12 percent, then 22 percent, and upward through the brackets. You only ever reach a higher rate for the portion of income that spills into that higher layer. The layers underneath keep their own lower rates no matter how high the stack goes.

The Seven Federal Tax Brackets

Current federal law uses seven rate brackets: 10, 12, 22, 24, 32, 35, and 37 percent. The rates themselves are set in law, but the dollar thresholds that separate the brackets are adjusted for inflation each year and differ by filing status. The table below uses rounded, illustrative thresholds for a single filer so the arithmetic stays clean. These are approximations of a recent tax year and are not the exact current figures, so always check the IRS page on federal income tax rates and brackets for the numbers that apply to your tax year.

Worked Example: Tax On 75,000 Dollars For A Single Filer

Numbers make the slice idea concrete. Take a single filer with 75,000 dollars of taxable income, using the illustrative brackets above. Their income fills three brackets, and each slice is taxed at its own rate. Watch how the tax is built one slice at a time rather than all at 22 percent.

Add the three slices and the total federal income tax is 11,460 dollars. This filer’s marginal rate is 22 percent, because their last dollar sits in the 22 percent bracket. But their effective rate is 11,460 divided by 75,000, which is about 15.3 percent. Notice the gap: the top bracket is 22 percent, yet the overall share of income paid in tax is roughly 15.3 percent, because the first 48,000 dollars was taxed at only 10 and 12 percent. The chart below shows how the 75,000 dollars splits across the three bracket rates.

Marginal Rate vs Effective Rate

Now the two rates can be placed side by side. The marginal rate is the rate on the last dollar earned, so for our filer it is 22 percent. The effective rate is the blended, whole-income rate, which came out to about 15.3 percent. The marginal rate is useful for planning decisions at the margin, such as what a bonus or an extra shift will be taxed at, or how much a deductible contribution saves. The effective rate is the honest picture of your total burden, useful for budgeting and for comparing years.

The two rates only match when all of your income sits inside a single bracket, which happens only at very low incomes where everything is taxed at 10 percent. As soon as your income climbs into higher brackets, the lower slices drag your effective rate below your marginal rate. The chart below contrasts the two rates for our 75,000 dollar example.

Why Moving Into A Higher Bracket Does Not Tax All Your Income

Because the higher rate applies only to the slice above the threshold, crossing into a new bracket never cuts your take-home pay. Suppose our filer earns 3,000 dollars more, moving from 75,000 to 78,000 dollars of taxable income, still inside the 22 percent bracket. The extra 3,000 is taxed at 22 percent, which is 660 dollars, leaving 2,340 dollars in hand. The raise is worth taking. There is no cliff where earning one more dollar makes you worse off, because only the new dollars meet the higher rate.

This matters for real decisions. A larger bonus, a side gig, or overtime is taxed at your marginal rate on those extra dollars, not on your salary as a whole. If you are curious how a one-time payment is handled, see our guide on how bonuses are taxed, since withholding on a bonus can look steep even when your actual bracket has not changed.

Brackets Are Only Part Of Your Paycheck

Federal income tax brackets explain one line of your pay stub, but they are not the whole story. Your paystub also reflects tax withholding, which is your employer’s estimate of your yearly income tax spread across each paycheck, not a separate tax. Separately, Social Security and Medicare payroll taxes are withheld at their own flat rates and do not follow the income tax brackets at all. That is why your total withholding can look larger than your bracket rate alone would suggest.

To move from these concepts to your own numbers, start with the difference between gross and net pay in our explainer on how to calculate take-home pay. If you manage variable income across the month, the Cash Flow Calculator helps you plan around the after-tax amount that actually reaches your account.

FAQs About Tax Brackets

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Educational note: This article is general information, not tax, financial, or legal advice. Tax rates, bracket thresholds, deductions, and filing rules change and depend on your situation and filing status. The dollar thresholds and figures here are rounded and illustrative and do not represent any single tax year. Confirm current brackets on the IRS website and consult a qualified tax professional before making decisions. Reviewed for accuracy by Prof. Dr. Khalil Mudassar, PhD, as part of our editorial review process. Content last reviewed September 10, 2026.