Understanding Marginal Tax Rates

See how your income is actually taxed across different brackets

Common Myth: "If I earn more money, I might end up with less take-home pay because I'll be in a higher tax bracket."

The Truth:

This is a common misconception! In reality:

  • Only the portion of your income that exceeds a bracket's threshold is taxed at the higher rate
  • You'll always take home more money when you earn more
  • Moving to a higher tax bracket only affects the additional income, not your entire income

Example:

Let's say you're a single filer earning $47,150 (the top of the 12% bracket):

  • If you earn $1 more, only that $1 is taxed at 22%
  • Your take-home pay would be $0.78 more, not less
  • All your previous income stays taxed at the same rates

Try the calculator below to see how your income is actually taxed. Notice how each additional dollar you earn always increases your take-home pay, even when you enter a new tax bracket. This tool uses single filer tax brackets for simplicity, but the concept of marginal tax rates applies to all filing statuses (married filing jointly, head of household, etc.).

$

Total Tax Owed

$8,253

Take-Home Pay

$51,747

Effective Tax Rate

13.75%

Tax Breakdown

Tax RateTax DistributionIncomeTax
10%
$11,600
(19.3% of total income)
Taxed at 10%
$11,600$1,160
12%
$35,549
(59.2% of total income)
Taxed at 12%
$35,549$4,266
22%
$12,849
(21.4% of total income)
Taxed at 22%
$12,849$2,827
24%$0$0
32%$0$0
35%$0$0
37%$0$0
← Scroll horizontally to see all columns →

Key Insight:

Your highest tax bracket rate is NOT your effective tax rate:

  • Your marginal tax rate is the rate applied to your highest bracket (22% in this case)
  • Your effective tax rate is the average rate you pay on all your income (13.75% in this case)
  • This difference exists because your lower income portions are taxed at lower rates (10%, 12%, etc.)

Notice how your effective tax rate is always lower than your highest bracket rate. This is the power of progressive taxation!

Important Notes About This Tool