US tax terms, explained simply

Tax bracket

An income range that is taxed at one rate. Your income is split across the brackets, and each part is taxed at that bracket's rate.

Bracket threshold

The dollar amount where one bracket ends and the next begins. Only the income above a threshold is taxed at the next, higher rate.

Marginal tax rate

The tax rate on your last dollar of income: the rate of the highest bracket your income reaches. It only applies to the income inside that bracket, not to everything you earn.

Effective tax rate

Your total tax divided by your total income. It shows what share of your income actually goes to tax, and it is usually much lower than your marginal rate.

Taxable income

The income your tax is actually calculated on, after deductions. For most people that means salary minus the standard deduction, so it is less than what they earn.

Progressive tax

A system where higher portions of income are taxed at higher rates. The US federal income tax works this way, and so do many state taxes.

Standard deduction

A set amount subtracted from your income before tax is calculated. Its size depends on your filing status and changes each year.

Filing status

Your filing category: single, married filing jointly, married filing separately, or head of household. It sets your bracket thresholds and your standard deduction.

FICA

Social Security and Medicare taxes taken from your pay. They are separate from income tax and apply in every state.

Flat tax

A single rate applied to all taxable income instead of brackets. Some states tax income this way.

Withholding

The tax your employer takes out of each paycheck and sends to the government for you during the year.

Take-home pay

What is left of your pay after income tax and payroll taxes like Social Security and Medicare.

See these terms in use in our United States tax guides.