Module 1 · Tax Formulas and Credits · Lesson 5 of 10
Taxable income, brackets and tax rates
How progressive brackets work, and marginal versus effective rates.
In this lesson · about 14 minutes
- Calculate tax on taxable income using the brackets
- Explain the difference between marginal and effective tax rates
- Correct the myth that a raise can lower take-home pay
What is left after deductions. The tax brackets for the filing status are applied to this amount.
Line 15
After deductions, what is left is taxable income. The tax on it depends on filing status, using brackets. The federal system is progressive: each rate applies only to the slice of income inside its bracket, not to all of the income.
| Rate | Single (2025) | Married filing jointly (2025) | Head of household (2025) |
|---|---|---|---|
| 10% | $0 – $11,925 | $0 – $23,850 | $0 – $17,000 |
| 12% | $11,925 – $48,475 | $23,850 – $96,950 | $17,000 – $64,850 |
| 22% | $48,475 – $103,350 | $96,950 – $206,700 | $64,850 – $103,350 |
| 24% | $103,350 – $197,300 | $206,700 – $394,600 | $103,350 – $197,300 |
| 32% | $197,300 – $250,525 | $394,600 – $501,050 | $197,300 – $250,500 |
| 35% | $250,525 – $626,350 | $501,050 – $751,600 | $250,500 – $626,350 |
| 37% | Over $626,350 | Over $751,600 | Over $626,350 |
The marginal rate is the rate on the next dollar earned: the client's top bracket. The effective rate is total tax divided by taxable income (or by total income, if you say so). The effective rate is always lower than the marginal rate once income passes the first bracket.
Worked example
Marcus earns $80,000 of taxable income
Marcus is single with $80,000 of taxable income. He says, "I'm in the 22% bracket, so I pay $17,600." Let's check.
Calculator
Bracket explorer
Drag the slider or type an amount. Each bar shows how much income lands in each bracket and the tax on it.
Total tax
$12,514.00
Marginal rate
22%
Effective rate
15.6%
A $5,000 raise adds $1,100.00 of federal tax (22.0% of the raise). The client keeps $3,900.00. A higher bracket never lowers take-home pay.
Federal, tax year 2025, simplified for learning. Not tax advice.
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For learning only, not tax advice. Figures are federal for tax year 2025 and simplified; phase-outs and special rules are not all shown. Check current IRS instructions before preparing a return.