Your marginal tax rate is the federal rate on your next dollar of taxable income, while your effective tax rate is the total tax you owe divided by your income. The two differ because each bracket rate applies only to the slice of income inside that bracket. In the 2026 illustrative example below, a single filer with $90,000 in wages is in the 22% bracket but pays about 12.2% of those wages in federal income tax.
Key takeaways
- The marginal rate answers "what happens to my next dollar?" and the effective rate answers "what share of my income went to tax?" Neither replaces the other.
- Crossing into a higher bracket taxes only the income above the threshold at the higher rate, so a raise leaves you with at least 63 cents of every extra dollar after federal income tax from the brackets alone.
- Phase-outs of credits and deductions can make the real cost of the next dollar higher than the bracket rate. Example: the 2025-law senior deduction shrinks by 6 cents per qualifying person for each dollar of MAGI above $75,000 (single) or $150,000 (joint).
- Social Security and Medicare tax (FICA) and state income tax are separate from the federal brackets and add to your overall rate.
Marginal and effective rate defined
The IRS describes the federal income tax as applying in layers called tax brackets, and says you pay the higher rate only on the part of your income that falls in the new bracket. The rate on the top layer you reach is your marginal rate. The blended result across all layers is your effective rate.
effective rate = total tax / income
marginal rate = rate of the bracket that your last dollar of taxable income falls in
- total tax is the sum of the tax from every bracket layer, after deductions and credits. You can include only federal income tax, or add payroll and state taxes for an all-in rate.
- income can be gross wages or taxable income. Both are in common use, so say which one you mean. This article divides by gross wages unless stated otherwise.
2026 brackets, compact version
For tax year 2026, the IRS inflation adjustments in Revenue Procedure 2025-32 keep seven rates from 10% to 37%. The table shows where each rate starts, as taxable income (income after the standard deduction and other deductions). These apply to income earned in 2026, on returns filed in 2027.
| Rate | Single, taxable income over | Married filing jointly, over |
|---|---|---|
| 10% | $0 | $0 |
| 12% | $12,400 | $24,800 |
| 22% | $50,400 | $100,800 |
| 24% | $105,700 | $211,400 |
| 32% | $201,775 | $403,550 |
| 35% | $256,225 | $512,450 |
| 37% | $640,600 | $768,700 |
The IRS lists the 2026 standard deduction at $16,100 for single filers and $32,200 for married couples filing jointly. Head of household and married filing separately have their own schedules, not shown here.
Three incomes worked out
Illustrative example. Each row below is a filer whose only income is wages, who takes the standard deduction and has no credits, so taxable income is wages minus $16,100 (single) or $32,200 (joint). The tax was computed bracket by bracket with code and checked against the tax table in Revenue Procedure 2025-32. These are federal income tax figures only.
| Filing status | Wages | Taxable income | Federal income tax | Marginal rate | Effective rate (tax / wages) |
|---|---|---|---|---|---|
| Single | $50,000 | $33,900 | $3,820 | 12% | 7.6% |
| Single | $90,000 | $73,900 | $10,970 | 22% | 12.2% |
| Single | $150,000 | $133,900 | $24,734 | 24% | 16.5% |
| Married jointly | $100,000 | $67,800 | $7,640 | 12% | 7.6% |
| Married jointly | $180,000 | $147,800 | $21,940 | 22% | 12.2% |
| Married jointly | $300,000 | $267,800 | $49,468 | 24% | 16.5% |
The $90,000 single row shows the layers. The first $12,400 of taxable income is taxed at 10% ($1,240), the next $38,000 at 12% ($4,560), and the remaining $23,500 at 22% ($5,170). Together that is $10,970. Only 32% of the taxable income was taxed at the 22% rate.
Two other patterns stand out. First, the effective rate is always below the marginal rate: 12.2% against 22% in the $90,000 row, or 14.8% if you divide by taxable income instead of wages. Second, the joint rows equal the single rows at double the wages because, for the 10% through 35% rates, the 2026 joint thresholds are exactly twice the single ones and the joint standard deduction is twice the single one. Differences between filing statuses appear at the top, where the 37% rate starts at $640,600 for single filers but $768,700 for joint filers.
Why brackets never cut your pay
The federal tax on a given taxable income only rises as income rises, and its slope never exceeds the top rate of 37%. So an extra $1,000 of taxable income raises federal income tax by at most $370, and by $220 when the whole amount falls in the 22% bracket. The brackets alone cannot make you worse off for earning more.
Illustrative example. A single filer with $73,900 of taxable income gets a $1,000 raise. Federal income tax rises from $10,970 to $11,190, an increase of $220, so $780 is left before payroll tax. A raise that straddles a threshold behaves the same way: from $50,000 to $51,000 of taxable income, $400 is taxed at 12% ($48) and $600 at 22% ($132), for $180 more tax and $820 kept.
The "bonus pushed me into a higher bracket and I lost money" story therefore comes from misreading the brackets. Only the dollars above the threshold are taxed at the higher rate. What can legitimately shrink a raise is everything outside the brackets: credits and deductions that shrink as income rises, payroll tax and state tax, covered in the next two sections.
When the next dollar costs extra
Some credits and deductions phase out as income rises, which adds a hidden surcharge to the bracket rate. One verified example is the enhanced deduction for seniors created by 2025 legislation. The IRS says it is an additional $6,000 per eligible person aged 65 or older for 2025 through 2028, or $12,000 for a married couple if both spouses qualify, and that it phases out above modified adjusted gross income (MAGI) of $75,000, or $150,000 for joint filers. It comes on top of the long-standing extra standard deduction for age 65, which Revenue Procedure 2025-32 sets for 2026 at $2,050 for an unmarried filer who is not a surviving spouse and $1,650 for each married filer. The phase-out math is on Schedule 1-A of Form 1040: multiply the MAGI above the threshold by 6% and subtract the result from $6,000. On a joint return, that reduced amount is claimed once for each spouse who qualifies.
deduction per qualifying person = 6,000 - 0.06 x (MAGI - threshold) (never below 0)
effective marginal rate = bracket rate x (1 + 0.06 x number of qualifying people)
- MAGI on Schedule 1-A is adjusted gross income (Form 1040, line 11b) plus excluded income from Puerto Rico and the foreign and American Samoa income excluded on Forms 2555 and 4563. For a filer with no such income, MAGI equals adjusted gross income.
- threshold is $75,000, or $150,000 for married couples filing jointly. The surcharge applies only between the threshold and the income at which the deduction reaches zero.
- 0.06 x number of qualifying people appears because each extra $1,000 of income shrinks each qualifying person's deduction by $60. With one qualifying person, $1,060 of additional income is taxed; with two qualifying spouses, $1,120.
Illustrative example. A single filer aged 66 has $90,000 of wages, no adjustments to income and no foreign income, so MAGI is $90,000 and the senior deduction is $6,000 - 0.06 x $15,000 = $5,100. Taxable income is $90,000 - $16,100 - $2,050 - $5,100 = $66,750, which sits in the 22% bracket. An extra $1,000 of wages adds $1,060 of taxable income and $233.20 of tax, an effective marginal rate of 23.32% rather than 22%. The deduction reaches zero at MAGI of $175,000 for a single filer ($6,000 / 0.06 = $100,000 above the $75,000 threshold). The surcharge is real but small, and the raise still leaves about 77 cents on the dollar before payroll tax.
For a married couple filing jointly who are both 65 or older, the surcharge doubles. At MAGI of $180,000 they keep 2 x ($6,000 - 0.06 x $30,000) = $8,400 of the deduction, and their taxable income is $180,000 - $32,200 - 2 x $1,650 - $8,400 = $136,100, in the 22% bracket. The next $1,000 costs $246.40 in tax, an effective marginal rate of 24.64%. That rate holds until their taxable income reaches the 24% bracket at about $247,200 of MAGI; from there until the deduction runs out at $250,000, the next dollar costs 26.88% (24% x 1.12).
Other credits and deductions use their own formulas, so the true cost of earning more depends on which ones apply. Tax software that shows a "what if I earn $1,000 more" comparison, or the filing worksheets, will reveal it. This article is general education, not tax advice, and a licensed tax professional can model a specific return.
What the brackets leave out
Payroll tax
Social Security and Medicare tax is not part of the brackets. Each employee pays 6.2% for Social Security and 1.45% for Medicare, per the IRS page on Social Security and Medicare withholding rates. On $90,000 of wages that is $6,885, or 7.65%. Adding it to the $10,970 of federal income tax gives an all-in federal rate of about 19.8%, against 12.2% for income tax alone.
State and local income tax
State and local income tax follows its own rules. USA.gov notes that what you owe depends on the tax rate of the state or locality where you live. Because those systems have their own brackets, deductions and credits, add them on top of the federal figures only after looking up your own state's rates.
Frequently asked questions
Does withholding too much tax raise my effective tax rate?
No. Withholding is a prepayment, and your effective rate is based on the tax you actually owe on the return. Having too much withheld means a smaller paycheck now and a larger refund later, as the IRS describes on its Tax Withholding Estimator page, which also helps you adjust Form W-4.
Do married couples pay the same rates as two single filers?
Up to the 35% rate, the 2026 joint bracket thresholds are exactly double the single ones, so a couple's joint return gives the same rates as two single returns with half the income each. The difference is at the 37% rate, which starts at $768,700 jointly against $640,600 for a single filer (two singles would reach it at a combined $1,281,200). The compact table above shows each threshold.
Why does payroll tax take a smaller share at high pay?
Social Security tax applies only to wages up to a yearly limit, which the IRS lists as $184,500 for 2026, while Medicare tax has no limit. Employers also withhold a 0.9% Additional Medicare Tax on wages above $200,000 in a calendar year, regardless of filing status. On $300,000 of wages from one employer, Social Security tax is capped at $11,439, Medicare tax is $4,350 and the Additional Medicare Tax withheld is $900, so payroll tax is about 5.6% of wages rather than 7.65%. The overall rate still rises, because income tax grows faster: for a single filer with only wages and the standard deduction, federal income tax plus payroll tax is about 25.5% of $184,500 and about 28.3% of $300,000.
Who can claim the senior deduction mentioned above?
The IRS says the person must reach age 65 by the last day of the tax year, the return must include the qualifying person's Social Security number, and married people must file jointly. The deduction is available for 2025 through 2028, to both itemizers and people who take the standard deduction, and is cut by the MAGI phase-out described earlier. For 2025, Schedule 1-A asks for a valid Social Security number and a birth date before January 2, 1961. Check the current year's Schedule 1-A and its instructions before relying on it.
Which effective rate should I quote: on wages or on taxable income?
Either is valid if it is labeled. Dividing by taxable income gave 14.8% in the $90,000 example, while dividing by wages gave 12.2%, because the standard deduction removes $16,100 from the denominator. Wage-based rates suit comparing take-home pay across jobs, and taxable-income-based rates suit checking how the brackets were applied.
Check your own rates in four steps
- Find taxable income on your most recent return (or an estimate for 2026) and the tax on the same return.
- Divide total tax by gross wages for the effective rate, and note whether you included payroll and state taxes.
- Look up the bracket that your taxable income falls in on the 2026 table for your filing status; that rate is your marginal rate.
- Before a raise, side job or large bonus, ask whether any credit or deduction you use phases out in that income range, and run a with-and-without comparison in tax software or the IRS Tax Withholding Estimator.
Sources
- Revenue Procedure 2025-32, IRS (2026 inflation adjustments and tax tables)
- IRS releases tax inflation adjustments for tax year 2026
- Federal income tax rates and brackets, IRS
- Check your eligibility for the new enhanced deduction for seniors, IRS
- Schedule 1-A (Form 1040), IRS
- One, Big, Beautiful Bill Act: tax deductions for working Americans and seniors, IRS
- Topic no. 751, Social Security and Medicare withholding rates, IRS
- Tax Withholding Estimator, IRS
- How to pay and get help with state and local taxes, USA.gov
