Tax Bracket
Quick Definition
An income range taxed at a specific rate within the progressive federal income tax system.
Key Takeaways
- You never "lose money" by moving to a higher bracket — only the income above the threshold is taxed at the higher rate
- Tax brackets are adjusted annually for inflation by the IRS
- Your effective tax rate (total tax ÷ total income) is always lower than your marginal bracket rate
- Understanding brackets helps optimize timing of income recognition and deductions
What Is Tax Bracket?
A tax bracket is a range of taxable income that is taxed at a specific marginal rate within the U.S. progressive income tax system. The federal tax code has seven brackets with rates of 10%, 12%, 22%, 24%, 32%, 35%, and 37%. Each bracket applies only to income within that range — not to total income. For example, a single filer earning $100,000 in 2026 pays 10% on the first $11,925, 12% on income from $11,926-$48,475, 22% on $48,476-$103,350, with income above $103,350 taxed at 24%. This progressive structure means the effective (average) tax rate is always lower than the marginal (highest bracket) rate. Tax brackets are adjusted annually for inflation, and different brackets apply depending on filing status (single, married filing jointly, head of household).
Tax Bracket Example
- 1A single filer earning $55,000 is "in the 22% bracket" but their effective tax rate is approximately 13.5% due to progressive taxation.
- 2A $5,000 charitable donation for someone in the 24% bracket reduces federal taxes by $1,200.
- 3Getting married and filing jointly can lower a couple's tax bracket because joint brackets are wider than single brackets.
Related Terms
Marginal Tax Rate
The tax rate applied to the last dollar of income earned, determined by the taxpayer's tax bracket.
Standard Deduction
A fixed dollar amount that reduces taxable income for taxpayers who do not itemize deductions.
Itemized Deduction
Individual tax-deductible expenses that can be listed separately instead of taking the standard deduction.
Tax Credit
A dollar-for-dollar reduction in the amount of tax owed, more valuable than an equivalent tax deduction.
FAFSA (Free Application for Federal Student Aid)
The federal form used to determine eligibility for financial aid including grants, loans, and work-study programs.
401(k)
An employer-sponsored retirement savings plan with tax advantages, often including employer matching contributions.
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