Taxes
How Tax Brackets Work: Marginal vs Effective Rate
Quick answer
A tax bracket is a slice of taxable income taxed at one rate. The US federal system has seven rates — 10%, 12%, 22%, 24%, 32%, 35%, and 37% — and each rate applies only to the income inside its slice. Moving into a higher bracket never raises the tax on the income below it.
Key takeaways
- Each bracket rate applies only to the income inside that slice — never to your whole income.
- Tax year 2026 single brackets run from 10% up to $12,400 to 37% above $640,600 (IRS IR-2025-103).
- Marginal rate is the rate on your next dollar; effective rate is total tax divided by income, and is always lower.
- A raise into a higher bracket cannot by itself reduce your after-tax income.
Tax year 2026 brackets
Educational information only. This page explains the federal income tax bracket system in general terms. It is not tax advice for your situation — consult a qualified tax professional for advice about your return. Bracket thresholds below are from IRS IR-2025-103 (Rev. Proc. 2025-32), verified 2026-10-29.
Heads of household
10% up to $17,700; 12% over $17,700; 22% over $67,450; 24% over $105,700; 32% over $201,750; 35% over $256,200; 37% over $640,600 (tax year 2026, per Rev. Proc. 2025-32, Table 2).
Worked example: $60,000 of taxable income, single filer, tax year 2026
10% × $12,400 = $1,240.00. 12% × ($50,400 − $12,400 = $38,000) = $4,560.00. 22% × ($60,000 − $50,400 = $9,600) = $2,112.00. Total federal income tax = $7,912.00. Marginal rate (rate on the next dollar): 22%. Effective rate (tax ÷ taxable income): about 13.2%.
This is the core insight: the filer is “in the 22% bracket” but pays nowhere near 22% on all $60,000.
Marginal rate
The rate on your next dollar of income. It is the rate that matters for decisions like “what does an extra $1,000 of income cost in tax?” (Answer for the example filer: about $220, before credits and other taxes.)
Effective rate
Total tax divided by income. It is always lower than the marginal rate under a graduated system, because lower slices were taxed at lower rates.
The raise myth
A raise that pushes you into a higher bracket cannot reduce your after-tax income on its own: only the income above the threshold is taxed at the new rate. What can change is eligibility for income-based credits or deductions, which phase out — a separate effect from brackets themselves.
What brackets do NOT cover
Brackets apply to taxable income, which is income after deductions — not gross pay. Payroll taxes (Social Security and Medicare), state tax, and capital-gains treatment are separate systems with their own rules.
At a glance
| Rate | Single: taxable income up to | Married filing jointly: taxable income up to |
|---|---|---|
| 10% | $12,400 | $24,800 |
| 12% | $50,400 | $100,800 |
| 22% | $105,700 | $211,400 |
| 24% | $201,775 | $403,550 |
| 32% | $256,225 | $512,450 |
| 35% | $640,600 | $768,700 |
| 37% | No cap | No cap |
Tax year 2026 federal income tax brackets (IRS IR-2025-103, verified 2026-10-29)
What this means for you
“What bracket am I in?” is the wrong question for most decisions. The marginal rate prices your next dollar; the effective rate describes your whole return. Keep them separate and the raise myth disappears. Unpack Money currently earns $0 affiliate revenue and has no approved affiliate programs, and this page contains no affiliate links.
FAQ
Is my bracket based on gross income or taxable income?
Taxable income — after the standard or itemized deduction and adjustments. A $75,000 salary with a $16,100 standard deduction (single, 2026) starts its bracket math at $58,900.
Do brackets change every year?
Yes — the IRS adjusts thresholds annually for inflation. Always use the table for the tax year you are filing, not the year you file in.
Why do two people with the same salary pay different tax?
Different deductions, credits, filing statuses, and income types. Brackets are only one input.
Sources
- IRS, IR-2025-103 — https://www.irs.gov/newsroom/irs-releases-tax-inflation-adjustments-for-tax-year-2026-including-amendments-from-the-one-big-beautiful-bill — verified 2026-10-29
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