How Federal Tax Brackets Work
The U.S. uses a progressive tax system -- meaning different portions of your income are taxed at different rates. This is one of the most widely misunderstood aspects of taxes. You do NOT pay your top bracket's rate on all of your income.
Here is how it works for a single filer with $85,000 in gross income and the 2025 standard deduction ($15,000):
- Taxable income: $85,000 - $15,000 = $70,000
- First $11,925 taxed at 10% = $1,193
- Next $36,550 ($11,926 to $48,475) taxed at 12% = $4,386
- Remaining $21,525 ($48,476 to $70,000) taxed at 22% = $4,736
- Total federal tax: ~$10,315 (14.7% effective rate)
Notice: even though this person is "in the 22% bracket" (their marginal rate is 22%), they're only paying 22% on the last $21,525 of their income -- not on all $70,000. That's why effective rates are always lower than marginal rates.
The bracket confusion: Many people worry that a raise will "push them into a higher bracket" and they'll take home less. This cannot happen. Only the dollars above the bracket threshold are taxed at the higher rate -- the rest stays taxed at lower rates. A raise that crosses a bracket line means a small portion of the raise is taxed more, but your total take-home always increases.
Standard vs Itemized Deductions
Every taxpayer can choose between the standard deduction (a fixed amount based on filing status) or itemizing (adding up specific deductible expenses like mortgage interest, state taxes up to $10,000, and charitable contributions). You take whichever is larger.
Since the 2017 Tax Cuts and Jobs Act roughly doubled the standard deduction, about 90% of filers now use the standard deduction. Itemizing typically only makes sense for homeowners with large mortgage interest payments, high-income earners in high-tax states, or those with substantial charitable contributions.
Above-the-Line vs Below-the-Line Deductions
Above-the-line deductions (also called "adjustments to income") reduce your Adjusted Gross Income (AGI) before you even choose standard vs itemized. These include traditional 401k/IRA contributions, HSA contributions, half of self-employment tax, student loan interest, and alimony. These are the most valuable deductions because they reduce your income before everything else is calculated.
Below-the-line deductions are what you choose between -- the standard deduction or itemized. These reduce your taxable income after AGI is calculated.
Federal Tax Brackets (2024, 2025 & 2026 Reference)
Single Filers
| Rate | Taxable Income | Tax Owed |
|---|
| 10% | $0 -- $11,925 | 10% of taxable income |
| 12% | $11,926 -- $48,475 | $1,193 + 12% of amount over $11,925 |
| 22% | $48,476 -- $103,350 | $5,579 + 22% of amount over $48,475 |
| 24% | $103,351 -- $197,300 | $17,651 + 24% of amount over $103,350 |
| 32% | $197,301 -- $250,525 | $40,199 + 32% of amount over $197,300 |
| 35% | $250,526 -- $626,350 | $57,231 + 35% of amount over $250,525 |
| 37% | Over $626,350 | $188,770 + 37% of amount over $626,350 |
Married Filing Jointly
| Rate | Taxable Income | Tax Owed |
|---|
| 10% | $0 -- $23,850 | 10% of taxable income |
| 12% | $23,851 -- $96,950 | $2,385 + 12% of amount over $23,850 |
| 22% | $96,951 -- $206,700 | $11,157 + 22% of amount over $96,950 |
| 24% | $206,701 -- $394,600 | $35,302 + 24% of amount over $206,700 |
| 32% | $394,601 -- $501,050 | $80,398 + 32% of amount over $394,600 |
| 35% | $501,051 -- $751,600 | $114,462 + 35% of amount over $501,050 |
| 37% | Over $751,600 | $202,155 + 37% of amount over $751,600 |
Standard deductions 2026: $15,700 (single), $31,400 (MFJ), $23,600 (HoH), $15,700 (MFS). | 2025: $15,000 / $30,000 / $22,500 / $15,000.
Frequently Asked Questions
Will getting a raise push me into a higher bracket and cost me money?
No -- this is the most common tax myth. Only the dollars above the bracket threshold are taxed at the higher rate. If you're at $48,000 taxable income (in the 12% bracket) and get a $5,000 raise, the first $475 of the raise is taxed at 12% and the remaining $4,525 is taxed at 22%. You pay slightly more tax on that last portion, but your total take-home always increases with any raise. You cannot earn more money and take home less due to brackets alone.
What is the difference between marginal and effective tax rate?
Your marginal rate is the tax rate that applies to your last dollar of income -- the highest bracket you reach. Your effective rate is the average rate across all your income -- always lower than your marginal rate. For example: a single filer with $85,000 gross income is in the 22% marginal bracket, but their effective federal rate is roughly 15%. The marginal rate matters for decisions like "should I do a Roth or traditional 401k?" The effective rate tells you your overall federal tax burden.
How do deductions reduce my taxes?
Deductions reduce your taxable income, not your tax bill directly. The tax savings equal the deduction amount multiplied by your marginal rate. If you're in the 22% bracket, a $10,000 deduction saves you $2,200 in federal taxes (22% x $10,000). In the 32% bracket, the same deduction saves $3,200. This is why high-income earners benefit more from deductions in dollar terms -- and why the value of a traditional 401k contribution depends on your bracket.
Should I use the standard deduction or itemize?
Take whichever is larger -- you can't take both. Add up your itemizable deductions: mortgage interest, state and local taxes (capped at $10,000), charitable contributions, and eligible medical expenses (above 7.5% of AGI). If that total exceeds your standard deduction ($15,000 single / $30,000 married), itemize. Otherwise, take the standard. About 90% of filers now use the standard deduction. The calculator above shows you your taxable income under both scenarios when you switch between them.
How are bonuses taxed?
Bonuses are taxed as ordinary income -- added to your annual salary and taxed at your marginal rate. Most employers withhold at a flat 22% "supplemental wage" rate for federal taxes on bonuses, regardless of your actual bracket. If your marginal rate is lower (10% or 12%), you'll get some of that withholding back as a refund. If your marginal rate is higher (24%+), you may owe additional tax at filing. Use the what-if analysis above to see the exact tax impact of a bonus.
What are tax credits vs tax deductions?
A deduction reduces your taxable income, saving you a percentage of it (your marginal rate). A credit reduces your actual tax bill dollar-for-dollar -- generally more valuable. A $1,000 deduction in the 22% bracket saves $220. A $1,000 credit saves $1,000 regardless of bracket. Common credits include the Child Tax Credit ($2,000/child), Earned Income Tax Credit (up to $7,830 for 2025), American Opportunity Credit (education), and Saver's Credit (for retirement contributions at lower incomes).