A tax bracket system is progressive: each slice of your income is taxed at its own bracket rate, not your whole income at the top rate.
Progressive system
The US federal income tax is progressive: each slice of your taxable income is taxed at the bracket rate that applies to that slice, not your entire income.
Example (single, 2024)
- 10 percent: up to $11,600.
- 12 percent: $11,601 to $47,150.
- 22 percent: $47,151 to $100,525.
- 24 percent: to $191,950, then 32, 35, 37 percent.
Calculation
For $60,000 of taxable income: 10 percent of $11,600 + 12 percent of $35,550 + 22 percent of $12,850 = $1,160 + $4,266 + $2,827 = $8,253.
Myth
Moving into a higher bracket never reduces your take-home pay.
Marginal vs effective
Effective rate = total tax / total income.
Check
Brackets change yearly.
Marginal rate
Only income inside each bracket is taxed at that bracket’s rate. Moving into a higher bracket never reduces take home pay for the income already earned.
Example
For a single filer in 2024 with taxable income of 60,000 dollars: 10% on the first 11,600, 12% on the next 35,550 (to 47,150), and 22% on the remaining 12,850. That is 1,160 + 4,266 + 2,827 = 8,253 dollars in total tax, an effective rate of about 13.8%.
Brackets
The US has seven federal brackets: 10%, 12%, 22%, 24%, 32%, 35% and 37%. The thresholds change by filing status and are adjusted for inflation each year.
Taxable income
Brackets apply to taxable income, which is gross income minus the standard deduction or itemized deductions. The 2024 standard deduction is 14,600 dollars for single filers and 29,200 for married couples filing jointly.
Marginal versus effective rate
Marginal rate is the rate on the last dollar. Effective rate is total tax divided by total income. The effective rate is always lower than the marginal rate for those in higher brackets.
Raises
A raise that moves you into a higher bracket only taxes the portion above the threshold at the higher rate.
Other taxes
Brackets apply to federal income tax. Payroll taxes (Social Security 6.2% and Medicare 1.45% for employees) and state income taxes are separate. Long term capital gains have their own rates of 0%, 15% and 20%.
Check numbers
Use the current IRS tables for exact thresholds.
Worked example with 2024 numbers
For tax year 2024, the single filer brackets are 10 percent up to 11,600 USD, 12 percent up to 47,150, 22 percent up to 100,525, 24 percent up to 191,950, 32 percent up to 243,725, 35 percent up to 609,350 and 37 percent above that. Suppose a single filer has 60,000 USD of taxable income. The first 11,600 is taxed at 10 percent (1,160 USD), the next 35,550 at 12 percent (4,266 USD) and the remaining 12,850 at 22 percent (2,827 USD). The total is 8,253 USD, an effective rate of about 13.8 percent, not 22 percent.
Marginal versus effective rate
Only the income within each bracket is taxed at that bracket’s rate, so a raise never lowers take home pay by pushing you into a higher bracket. Taxable income is gross income minus adjustments and the standard deduction, which was 14,600 USD for single filers in 2024. Credits reduce tax directly, and deductions reduce income. Brackets are adjusted yearly for inflation. Payroll taxes for Social Security (6.2 percent up to a wage base of 168,600 USD in 2024) and Medicare (1.45 percent) are separate. State income taxes are also separate, and nine states have no wage income tax.
Based on data from the IRS
