What Are Tax Brackets?
Tax brackets are ranges of income that are taxed at different rates. The United States uses a **progressive tax system**, meaning different portions of your income are taxed at different rates. As your income increases, only the amount that falls into higher brackets is taxed at those higher rates.
Think of tax brackets like climbing a ladder. Each rung represents a bracket, and you only pay the higher rate on the income within that rung—not on the entire ladder.
The Biggest Misconception
❌ MYTH:
"If I earn $1 more and move into a higher tax bracket, I'll take home less money overall."
✅ REALITY:
Only the dollars that fall within each bracket are taxed at that bracket's rate. Moving into a higher bracket **never** results in less take-home pay—only the additional income above the threshold is taxed at the higher rate.
Example: How It Really Works
Let's say you're single and earn **$50,000** in 2025. Here's how your taxes are calculated:
- •First $11,925 is taxed at 10% = $1,193
- •Next $36,550 ($11,925 to $48,475) is taxed at 12% = $4,386
- •Remaining $1,525 ($48,475 to $50,000) is taxed at 22% = $336
Total tax: $5,915 (11.8% effective rate)
Your marginal rate is 22%, but your effective rate is only 11.8%.
Marginal vs. Effective Tax Rate
Marginal Tax Rate
The tax rate you pay on your **last dollar** of income. This is your highest tax bracket.
Example: If you earn $50,000, your marginal rate is 22%.
Effective Tax Rate
Your **average** tax rate across all income. Calculated as total tax ÷ total income.
Example: If you earn $50,000 and pay $5,915 in tax, your effective rate is 11.8%.
Try Our Calculators
See exactly how tax brackets affect your income with our interactive tools.