Maybe you've heard the more you earn, the more you get taxed. It's true. What's not true: that getting a raise could bump you into a new tax bracket and lead to you being taxed so much that your income is effectively lower than before. That's because not all of your income is subject to the same tax rate.
Here's a glimpse at the marginal tax rate and how it differs from the effective tax rate.
What is a marginal tax rate?
A marginal tax rate is the percentage at which your last dollar of taxable income is taxed. It's important to note it's not every dollar—just the last one. In a progressive tax system, other dollars are likely taxed at different rates. If that sounds confusing, let's break things down.
Marginal tax rates are assigned to tax brackets, or taxable income ranges. When you hear your tax bracket is a certain percentage, it can be easy to assume that means that your entire income is taxed at that rate.
In a progressive tax system, like the US uses, the first dollars you earn are very likely taxed at a lower rate than later ones, which means you're unlikely to actually pay the exact rate listed on your tax bracket for all of your dollars. We'll touch on how to calculate the amount you actually pay—your effective tax rate—later on.
How do marginal tax rates work?
It can be hard to wrap your head around how marginal tax rates work, so let's think about your taxable income as a pitcher of water. Each tax bracket is a glass to be filled. You'd start by filling the glass representing the lowest income level, which is 10% in the US. Once it's full, you'd fill the next one (12%) and continue filling glasses for the other tax brackets (22%, 24%, 32%, 35%, and 37%) until your pitcher was empty.
At the low end, for example, single filers for 2024 with $11,600 or less in total taxable income fall entirely within the 10% marginal tax rate bracket. So they pay 10% of their taxable income in taxes. But remember about adjustments and deductions—those can really add up. The standard deduction in 2024 is $14,600 for a single filer.
At the high end, a single filer in 2024 making more than $609,350 in taxable income has some income that falls into the 37% marginal tax rate bracket. But their entire taxable income is not taxed at 37%—just the portion above $609,350, which is the threshold for that highest tax-rate tier. Instead, that high-earner pays taxes on a portion of their income at the 10% rate, a portion at the 12%, and so on. In a progressive tax system, each dollar is only taxed for the bracket (or glass, in our above example) that it occupies.
IRS marginal tax rates 2024
| Rate | Single filers | Married couples filing jointly | Head of household |
|---|---|---|---|
| 10% | $0 to $11,600 | $0 to $23,200 | $0 to $16,550 |
| 12% | over $11,600 to $47,150 | over $23,200 to $94,300 | over $16,550 to $63,100 |
| 22% | over $47,150 to $100,525 | over $94,300 to $201,050 | over $63,100 to $100,500 |
| 24% | over $100,525 to $191,950 | over $201,050 to $383,900 | over $100,500 to $191,950 |
| 32% | over $191,950 to $243,725 | over $383,900 to $487,450 | over $191,950 to $243,700 |
| 35% | over $243,725 to $609,350 | over $487,450 to $731,200 | over $243,700 to $609,350 |
| 37% | over $609,350 | over $731,200 | over $609,350 |
IRS marginal tax rates 2025
| Rate | Single filers | Married couples filing jointly | Head of household |
|---|---|---|---|
| 10% | $0 to $11,925 | $0 to $23,850 | $0 to $17,000 |
| 12% | over $11,925 to $48,475 | over $23,850 to $96,950 | over $17,000 to $64,850 |
| 22% | over $48,475 to $103,350 | over $96,950 to $206,700 | over $64,850 to $103,350 |
| 24% | over $103,350 to $197,300 | over $206,700 to $394,600 | over $103,350 to $197,300 |
| 32% | over $197,300 to $250,525 | over $394,600 to $501,050 | over $197,300 to $250,500 |
| 35% | over $250,525 to $626,350 | over $501,050 to $751,600 | over $250,500 to $626,350 |
| 37% | over $626,350 | over $751,600 | over $626,350 |
How to calculate taxes using marginal tax rates
Using the 2024 marginal tax rates for a single filer, let's look at a hypothetical example marginal tax rate calculation. Let's say a single filer had a 2024 gross annual income of $130,000 and taxable income of $115,000 after deductions. To get their marginal tax rate, take the percentage from the progressive scale from dollars earned within each bracket. For our example earner, that equates to:
| Tax rate | Taxable income | Taxes owed per bracket (bracket's taxable income × bracket's tax rate) |
|---|---|---|
| 10% | $0 to $11,600 | $1,160 ($11,600 × 0.10) |
| 12% | over $11,600 to $47,150 | $4,266 ($35,550 × 0.12) |
| 22% | over $47,150 to $100,525 | $11,742.50 ($53,375 × 0.22) |
| 24% | over $100,525 to $115,000 (stopped at our filer's income) | $3,474 ($14,475 × 0.24) |
| Total taxes owed | $20,642.50 |
Even though our example filer's top income fell in the 24% tax bracket, the progressive nature of US tax rates means they didn't owe a flat 24% of their entire taxable income. That tax bill would be higher at $27,600. Instead, they owed $20,642.50—or $6,957.50 less—because of the progressive tax system.
Marginal tax vs. flat tax
A flat tax means that all taxpayers pay the same percentage of their income, no matter how much they earn. So someone earning $50,000 would pay the same percentage of their income as someone earning $500,000.
A marginal tax means people are taxed on a scale, so a different percentage may be applied to each dollar as your income grows. In the US system, a single filer with total taxable income of $50,000 would find themselves in the 22% tax bracket while a single filer with total taxable income of $500,000 would be in the 35% tax bracket.
Translation: In the US, taxable income is taxed federally on a progressive scale, meaning that higher incomes are taxed at higher rates.
Marginal vs. effective tax rate
Remember: Your marginal tax rate only applies to that last dollar you earn. If you're interested in the rate you're actually paying in taxes, you'll need to find out your effective tax rate.
An effective tax rate, aka the average amount you pay on each dollar, is the percentage of your total income owed to the IRS. To get that number, divide the amount you pay in taxes by your gross annual income.
Using our hypothetical example single filer, you can calculate their effective tax rate by dividing their total taxes owed, $20,642.50, by $135,000—which we'll say is their gross annual income before deductions for this example—to get an effective tax rate of less than 16%. That tax rate is noticeably lower than their 24% marginal tax rate, because their income was taxed on a progressive scale, from 10% to 24%—and they took tax deductions.
Ways to reduce your marginal tax rate
Tax deductions can reduce your taxable income, which potentially reduces your marginal tax rate and your total income tax owed. For example, in 2024, all single filing taxpayers were allowed a $14,600 standard deduction. But it's possible they could have reduced their taxable income more if, instead of taking the standard deduction, they itemized deductions—individually listing out deductions such as mortgage interest and charitable contributions. Alternatively, they could have reduced their taxable income by contributing to a 401(k) account or another tax-advantaged retirement account. You do not need to itemize deductions to take tax deductions on contributions to tax-advantaged accounts.
Returning to our hypothetical example single filer, let's say itemizable deductions and pre-tax contributions to tax-advantaged retirement accounts reduced their total taxable income from $115,000 to $95,000. Now, no part of their taxable income will fall within the 24% tax bracket, and their total taxes owed dropped thousands of dollars, from $20,642.50 to $15,953.
| Tax rate | Taxable income | Taxes owed per bracket (bracket's taxable Income × bracket's tax rate) |
|---|---|---|
| 10% | $0 to $11,600 | $1,160 ($11,600 × 0.10) |
| 12% | over $11,600 to $47,150 | $4,266 ($35,550 × 0.12) |
| 22% | over $47,150 to $95,000 (stopped at our filer's income) | $10,527 ($47,850 x 0.22) |
| TOTAL TAXES OWED | $15,953.00 |