The U.S. tax system is progressive, meaning that higher slices of income are taxed at higher rates. The arrangement is designed to ensure that individuals who earn more pay a larger share of taxes than those with lower incomes.
Taxpayers can face up to seven federal tax brackets, depending on their income and filing status. The brackets have tax rates of 10%, 12%, 22%, 24%, 32%, 35% and 37%. As you earn more, a portion of your income can be pushed into a higher tax bracket; your marginal tax rate is the highest bracket you fall into.
Here are the basics on marginal tax rates so you can understand how they impact your income taxes.
Featured Tax Software Partners
1
TaxSlayer Premium
$50.36
$47.95
2
TurboTax Deluxe
$79
$64
3
H&R Block
$0 (online only)
$0
What Is a Marginal Tax Rate?
Your marginal tax rate is the tax bracket imposed on the highest dollar earned. It’s based on your taxable income, which may be lower than what you actually earned during the year.
Let’s say you’re single and earn $60,000 in 2024. After deductions and adjustments, $50,000 of that income may be taxable. The marginal tax rate on $50,000 would be 22%. But, because the U.S. tax system is progressive, not all of your income will be taxed at that rate.
Your first $10,275 of earnings will be taxed in the lowest tax bracket of 10%; the next tier of your income will be taxed at a rate of 12%. Once your income reaches its highest tax bracket—22% in this example—you’ve hit your marginal tax rate.
How To Calculate the Marginal Tax Rate
Determining your marginal tax rate can be a simple process, but first you must do the real work: figuring out your taxable income.
You can determine your taxable income by adding up all of your reportable income and subtracting certain tax deductions and adjustments, including:
- The standard deduction or itemized deductions
- Retirement savings contributions
- Student loan interest
- Penalties for early withdrawals from CDs (certificates of deposit)
After calculating your taxable income, you can pinpoint your marginal tax rate. Simply find the top tax bracket that corresponds to your filing status and taxable income.
What Is the Difference Between the Marginal vs. Effective Tax Rate?
While your marginal tax rate is good to know, it doesn’t paint your full tax picture because only a portion of your income is taxed at that rate. It may be more helpful to understand your effective tax rate, which is the average tax rate you pay.
Let’s say again that you’re single and have a taxable income of $50,000. Your effective tax rate would be 12%, and here’s where that comes from.
| Income | Tax Rate | Total Tax | |
|---|---|---|---|
| First Tier | $0 to $11,600
Your income portion in this bracket = $11,600 – $0 or $11,600 | 10% | $1,160
($11,600 x 0.10) |
| Second Tier | $11,601 to $47,150
Your income portion in this bracket = $47,150 – $11,601 or $35,549 | 12% | $4,266
($35,549 x 0.12) |
| Third Tier | $47,150 to $50,000
Your income portion in this bracket = $50,000 – $47,150 or $2,850 | 22% | $627
($2,850 x 0.22) |
Your total tax on your taxable income of $50,000 = $1,160 + $4,266 + $627, or $6,053. Divide that into $50,000 and you get 0.12, or 12%. That’s your effective—or average—tax rate.
So although your marginal tax rate is 22%, you actually pay a much smaller share of your income in taxes.
Compare the best tax software of 2025
Ready to File Your Taxes?
On TaxSlayer's Website
