How Tax Brackets Work
What marginal tax rates mean, how brackets actually apply to your income, and the difference between your marginal rate and effective rate.
The biggest misconception about tax brackets
Most people believe that if they earn more money and "move into a higher tax bracket," all of their income gets taxed at the new higher rate. This is wrong.
In the US federal income tax system, only the income within each bracket is taxed at that bracket's rate. Moving into a higher bracket means that portion of income is taxed at a higher rate — not your entire income.
Result: Earning more money never reduces your take-home pay. Every additional dollar you earn is always worth something after taxes, even if a larger fraction goes to the government.
2025 federal income tax brackets (single filers)
Each bracket applies only to income within that range:
| Rate | Income range | Tax on this portion |
|---|---|---|
| 10% | $0 – $11,925 | Up to $1,192.50 |
| 12% | $11,926 – $48,475 | Up to $4,385.00 |
| 22% | $48,476 – $103,350 | Up to $12,073.00 |
| 24% | $103,351 – $197,300 | Up to $22,540.00 |
| 32% | $197,301 – $250,525 | Up to $17,027.00 |
| 35% | $250,526 – $626,350 | Up to $131,518.00 |
| 37% | Over $626,350 | Everything above $626,350 |
These are 2025 rates for single filers before any deductions. Married filing jointly has different bracket thresholds.
Worked example: $75,000 income
A single filer with $75,000 taxable income in 2025 does NOT pay 22% on all $75,000. Here's how the brackets actually apply:
10% on first $11,925 = $1,192.50 12% on $11,926–$48,475 = $4,386.00 22% on $48,476–$75,000 = $5,835.28 ───────────────────────────────────── Total federal tax = $11,413.78 Marginal rate (top bracket): 22% Effective rate: 15.2% ($11,413 ÷ $75,000)
Even though this person is "in the 22% bracket," they only pay 22% on the $26,525 above $48,475 — and their overall effective rate is just over 15%.
Marginal rate vs. effective rate
Marginal rate
The rate that applies to your next dollar of income — the rate of your highest bracket. Used to evaluate decisions like "should I take this freelance project?" or "how much will a raise actually net me?"
Effective rate
Your total tax bill divided by your total income — the actual percentage of your income that went to federal taxes. This is the number that reflects what you actually paid, on average, across all your income.
Taxable income vs. gross income
Brackets apply to taxable income, not your total gross income. You reduce your gross income first:
Gross income: $90,000
− 401(k) contribution: − $7,000
− Standard deduction: − $15,000
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Taxable income: $68,000The 2025 standard deduction is $15,000 for single filers and $30,000 for married filing jointly. Most people take the standard deduction rather than itemizing. Pre-tax contributions to 401(k), HSA, and traditional IRA also reduce taxable income.
Frequently asked questions
- Does getting a raise ever put me in a worse position after taxes?
- No. Because only the income above a bracket threshold is taxed at the higher rate, a raise always increases your take-home pay. The only scenario where more gross income could leave you worse off financially involves means-tested benefits (subsidies, credits) that phase out as income rises — but that's about losing benefits, not about the tax brackets themselves.
- What's the difference between federal and state income taxes?
- Federal income tax uses the progressive bracket system described here. State income taxes vary widely: some states (Florida, Texas, Nevada) have no income tax; others (California, New York) have their own progressive brackets. You calculate and pay them separately. This guide covers only federal taxes.
- What is the FICA tax?
- FICA (Federal Insurance Contributions Act) covers Social Security (6.2%) and Medicare (1.45%) taxes. These are separate from income tax and apply to wages up to $176,100 (Social Security cap in 2025). Self-employed people pay both the employee and employer share — 15.3% total — though they can deduct half of it.
- How do tax brackets work for married couples?
- Married filing jointly has wider bracket thresholds — roughly double the single filer thresholds. This is sometimes called the "marriage bonus" for couples where incomes differ significantly. Couples with similar incomes may see a "marriage penalty" where their combined income pushes them into higher brackets than if they'd filed as two single filers.