How Do Tax Brackets Work? A Simple Guide
A simple guide to US federal tax brackets: what a marginal rate is, why a raise doesn't lower your take-home pay, and how to read a bracket table.
Most people can find a bracket table in seconds. The confusing part is what it means. The most common guess (that your bracket's rate applies to everything you earn) is wrong.
This guide explains how the brackets really work, using a simple example first, then the real federal table, pulled from the same data as our calculator.
Brackets tax parts of your income, not all of it
The US federal income tax is a progressive tax: your taxable income is split into ranges (the brackets), and each range has its own rate. Being "in the 22% bracket" means only the part of your income above that bracket's threshold is taxed at 22%. Everything below it is still taxed at the lower rates.
Here's a made-up system with three brackets, just to show the math:
| Income range | Rate |
|---|---|
| First $10,000 | 10% |
| $10,000 – $30,000 | 20% |
| Over $30,000 | 30% |
Someone with $40,000 of taxable income in this made-up system would pay:
- 10% on the first $10,000 = $1,000
- 20% on the next $20,000 = $4,000
- 30% on the last $10,000 = $3,000
That's $8,000 in total, or 20% of their income, even though they are "in the 30% bracket". The 30% rate only touched the last $10,000.
Marginal vs. effective rate
Two numbers describe the same tax bill in different ways:
- Your marginal rate is the rate on your last dollar, in the highest bracket your income reaches. It matters when you want to know how much tax you'd pay on extra income, like a raise or a bonus.
- Your effective rate is your total tax divided by your total income. It tells you what share of your income actually went to tax, and it is usually much lower than your marginal rate.
Our calculator shows both, plus a bracket-by-bracket picture of where each part of your income lands.
The "higher bracket" myth
A common worry: "If my raise bumps me into a higher bracket, will I take home less?" No. The higher rate only applies to the dollars above the threshold, so more income always means more take-home pay as far as the brackets are concerned.
One thing to know: some tax credits and benefit programs get smaller as income grows. That is a separate rule from the brackets, and how it plays out depends on your situation. It's a good question for a tax professional.
The current federal brackets
The table below shows the most recent tax year in our data (single filers). One key detail: the brackets apply to your taxable income. For most people that means salary minus the standard deduction, so the brackets work on a smaller number than your full salary.
| Taxable income | Marginal rate |
|---|---|
| Up to $12,400 | 10% |
| $12,400 – $50,400 | 12% |
| $50,400 – $105,700 | 22% |
| $105,700 – $201,775 | 24% |
| $201,775 – $256,225 | 32% |
| $256,225 – $640,600 | 35% |
| Over $640,600 | 37% |
The IRS updates the thresholds every year for inflation, which is why bracket tables always name a specific year.
State income tax comes on top
Most states also charge income tax, in one of three ways:
- Their own brackets: for example, California and New York have multi-bracket systems of their own.
- One flat rate: several states charge a single rate on all taxable income.
- No state income tax: nine states charge none on wages; see which states have no income tax.
Any state page shows the federal and state taxes together for an income you pick.
Sources
Frequently asked questions
What are tax brackets?
Tax brackets are income ranges that are each taxed at their own rate. The US federal system currently has seven rates, from 10% to 37%. Each rate only applies to the part of your income that falls inside that range, not to all of it.
Can a raise push me into a higher bracket and lower my take-home pay?
No. Moving into a higher bracket only means the dollars above the threshold get taxed at the higher rate. The dollars below it are still taxed at the lower rates, so earning more never means taking home less because of the brackets. (Some tax credits and benefits do shrink as income rises, but that is a separate rule.)
What is the difference between marginal and effective tax rates?
Your marginal rate is the rate on your last dollar of income, meaning the rate of the highest bracket your income reaches. Your effective rate is your total tax divided by your total income. The effective rate is usually much lower, because most of your income is taxed at the lower rates.
How often do federal tax brackets change?
The IRS adjusts the income ranges every year to keep up with inflation, and Congress sometimes changes the rates themselves. That is why bracket tables always name a tax year.
Do all states use tax brackets too?
No. Some states have their own brackets, some charge one flat rate on all income, and nine states charge no state income tax on wages at all. Our guide to states with no income tax covers that last group.