How Federal Income Tax Brackets Actually Work

A raise will never lower your take-home pay by pushing you into a higher bracket. Here is how the US marginal tax system really works, with the current rates and a plain worked example.

Photo: U.S. Bureau of Engraving and Printing, via Wikimedia Commons (Public domain)

One of the most stubborn myths in American personal finance is that earning a little more money can bump you into a higher tax bracket and leave you with less. It cannot. The US uses a marginal system, and understanding it takes about five minutes.

Your income is taxed in slices

Federal income tax is progressive and marginal. Your taxable income is divided into tiers, called brackets, and each slice is taxed only at that bracket's rate. The dollars in the lowest slice are taxed at the lowest rate, the next slice at the next rate, and so on. Nothing you earn causes your entire income to be taxed at a higher rate.

There are currently seven federal rates: 10%, 12%, 22%, 24%, 32%, 35%, and 37%. These came out of the 2017 Tax Cuts and Jobs Act and were set to expire after 2025, which would have pushed the top rate back to 39.6%. Legislation signed in July 2025 made the seven-rate structure permanent, so 37% remains the top rate.

Marginal rate versus effective rate

Two numbers describe your taxes, and people confuse them constantly:

• Your marginal rate is the rate on your last, highest dollar. It is the bracket people mean when they say "I'm in the 22% bracket."
• Your effective rate is your total tax divided by your total income. It is always lower than your marginal rate, because most of your income was taxed in the lower slices.

A worked example

Take a single filer with $100,000 of gross income in the 2026 tax year, taking the standard deduction of $16,100. That leaves $83,900 of taxable income. The tax stacks up like this:

• 10% on the first $12,400 = $1,240
• 12% on the next slice up to $50,400 = about $4,560
• 22% on the remainder up to $83,900 = about $7,370

The total is roughly $13,170. This person's marginal rate is 22%, but their effective rate on the full $100,000 is only about 13%. That gap is the whole point: the headline bracket is not what you actually pay on your income overall.

The standard deduction

Before any of this, most people subtract the standard deduction, a flat amount that shields part of your income from tax entirely. For the 2026 tax year it is $16,100 for single filers and $32,200 for married couples filing jointly. The large majority of taxpayers take the standard deduction rather than itemizing.

Why the numbers change every year

The exact dollar thresholds for each bracket, and the standard deduction, are adjusted for inflation annually by the IRS. So the rates tend to stay put for years at a time, but the income ranges they apply to creep upward each year. That is why any specific figure, including the ones above, should be checked against the current tax year before you rely on it.

The rates are stable. The dollar thresholds move a little every year. Always confirm the current-year numbers before doing your own math.

What this means for you

Two practical takeaways. First, never turn down a raise or overtime out of fear of "the next bracket," because the math simply does not work that way. Second, when you compare your tax burden to someone else's, compare effective rates, not brackets. The bracket is a ceiling on your last dollar, not a description of your whole bill.

This is background information, not tax advice. For your own situation, the IRS website has the current-year brackets and the standard deduction, and a tax professional can handle the details.