Tax Bracket
Definition
The range of income taxed at a particular rate in a progressive tax system. Only the income within each bracket is taxed at that rate, not your entire income.
Tax brackets are the foundation of the US progressive income tax system. In 2025, there are seven federal brackets: 10%, 12%, 22%, 24%, 32%, 35%, and 37%. A common misconception is that moving into a higher bracket means all your income is taxed at the higher rate — in reality, only the income within that specific bracket is taxed at the higher rate.
For example, a single filer earning $60,000 in 2025 pays: 10% on the first ~$11,600 ($1,160), 12% on the next ~$35,600 ($4,272), and 22% on the remaining ~$12,800 ($2,816). The total tax is approximately $8,248 — an effective rate of about 13.7%, not 22%.
Understanding your marginal tax bracket (the rate on your next dollar of income) is crucial for financial decisions. It determines the tax savings from retirement contributions (a $1,000 401k contribution saves $220 in the 22% bracket), the cost of additional income, and the value of deductions.
Strategic income management around bracket boundaries can save meaningful money. If you're near the top of the 22% bracket ($96,950 for single filers), additional 401(k) contributions can keep you below the 24% bracket. Roth conversions can fill up lower brackets with tax-free future growth.
State tax brackets add another layer. California has brackets up to 13.3%, while states like Florida and Texas have no income tax. Your total marginal rate (federal + state + potentially local) determines the true cost of each additional dollar earned.
Where this appears in Clarity
Clarity automatically tracks and calculates these concepts across your connected accounts.
Related Terms
Frequently Asked Questions
What tax bracket am I in?
Your marginal bracket depends on your filing status and taxable income (after deductions). For 2025 single filers: 10% up to ~$11,600, 12% up to ~$47,150, 22% up to ~$100,525, 24% up to ~$191,950, 32% up to ~$243,725, 35% up to ~$609,350, 37% above that.
Can earning more money put me in a worse position?
Almost never. Because of progressive taxation, earning more always leaves you with more after-tax income. However, higher income can phase out certain deductions, credits, and Roth IRA eligibility. These phase-outs can create temporarily high effective marginal rates in specific income ranges.