Key takeaways
- Your marginal rate is the rate on your next dollar of income: your top bracket. Your effective rate is your total tax divided by your income.
- Brackets apply in layers. Only income above each threshold is taxed at that bracket’s rate.
- A single filer earning $85,000 in 2026 is in the 22% bracket but pays about 11.6% of income in federal income tax.
- Moving into a higher bracket never lowers your take-home pay. Only the extra dollars are taxed at the higher rate.
“I’m in the 22% bracket” is one of the most misunderstood sentences in personal finance. It doesn’t mean you pay 22% of your income in tax. It means your last dollars are taxed at 22%. Knowing the difference helps you judge raises, deductions, and retirement contributions correctly.
How tax brackets actually work
The federal income tax is progressive: income is split into layers, and each layer is taxed at its own rate. Here are the 2026 brackets for single filers, applied to taxable income (after deductions):
| Rate | Taxable income |
|---|---|
| 10% | $0 to $12,400 |
| 12% | $12,400 to $50,400 |
| 22% | $50,400 to $105,700 |
| 24% | $105,700 to $201,775 |
| 32% | $201,775 to $256,225 |
| 35% | $256,225 to $640,600 |
| 37% | Over $640,600 |
Everyone, including high earners, pays 10% on their first $12,400 of taxable income. The higher rates apply only to the income above each threshold.
A worked example
A single filer with $85,000 of wages and no other income, taking the 2026 standard deduction of $16,100:
- Taxable income: $85,000 − $16,100 = $68,900
| Layer | Income in this layer | Rate | Tax |
|---|---|---|---|
| 1 | $12,400 | 10% | $1,240 |
| 2 | $38,000 | 12% | $4,560 |
| 3 | $18,500 | 22% | $4,070 |
| Total | $68,900 | $9,870 |
- Marginal rate: 22%, the rate on the top layer.
- Effective rate: $9,870 ÷ $85,000 = 11.6% of total income.
The effective rate is roughly half the marginal rate, because most of the income was taxed at lower rates or not at all, thanks to the standard deduction.
Why a raise never hurts (from brackets alone)
Suppose the same person gets a $5,000 raise. Their federal income tax rises from $9,870 to $10,970, an increase of $1,100. That’s 22% of the raise, their marginal rate. They keep the other $3,900 before payroll and state taxes.
Crossing into a higher bracket works the same way. If a raise pushes some income into the next bracket, only the dollars above the threshold are taxed at the new rate. Everything below is taxed exactly as before.
The real exceptions are benefit cliffs: some credits, subsidies, and public benefits phase out or end at certain incomes, which can offset part of a raise. Those are worth checking if you’re near a limit, but they’re not caused by tax brackets.
Which rate to use for which decision
Use your marginal rate to estimate the tax effect of a change at the margin:
- A pre-tax 401(k) contribution. Contributing $3,000 more lowers this person’s federal income tax by $660, their marginal rate times the contribution.
- A deduction. Each extra dollar of deduction saves your marginal rate, if it actually reduces taxable income. Many people take the standard deduction, so extra itemizable expenses may save nothing.
- Side income. Extra freelance income is taxed at your marginal rate, plus self-employment tax.
- Roth vs. traditional. Compare your marginal rate now with your expected rate in retirement. See Roth vs. traditional IRA.
Use your effective rate to understand your overall tax burden, compare years, or budget roughly for taxes on total income.
Don’t forget payroll and state taxes
Federal income tax is only part of what comes out of a paycheck. Wages are also subject to Social Security and Medicare (FICA) taxes of 7.65% for employees (Social Security stops at $184,500 of wages in 2026), and most states have their own income tax. For this example, FICA adds about $6,503, so the combined federal rate on wages is closer to 19.3%.
To see all of these together, per paycheck, use the paycheck calculator. For your full federal return, including credits like the child tax credit, use the income tax calculator.