Taxes & Income · Glossary
Marginal tax rate
The tax rate on your next dollar of income — the rate of the highest bracket you reach. It's what matters for raises, bonuses, and deductions.
Federal income tax rates run from 10% to 37%. If your taxable income reaches the 22% bracket, a $1,000 raise costs $220 in federal income tax (plus FICA and any state tax), and a $1,000 deduction saves $220.
Moving into a higher bracket never lowers your take-home pay; only the dollars above the threshold are taxed at the higher rate. Your effective tax rate is always lower than your marginal rate.
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Disclaimer: Definitions are general education, not financial, tax, or legal advice. Figures are for the 2026 tax year unless noted.