Marginal Tax Rate
The tax rate applied to the last dollar of your taxable income, determined by which federal tax bracket that dollar falls into.
How It Works
Your marginal tax rate is the percentage of tax you pay on your next dollar of income, not your overall rate. The U.S. uses a progressive tax system with seven federal brackets in 2025: 10%, 12%, 22%, 24%, 32%, 35%, and 37%. Each bracket applies only to income within that range. For example, a single filer earning $50,000 pays 10% on the first $11,925, 12% on the next portion up to $48,475, and 22% on the remaining amount above $48,475. Understanding your marginal rate is critical for financial decisions because it tells you the tax cost of earning one more dollar. If you're considering overtime, a bonus, or a side gig, your marginal rate determines how much of that extra income goes to taxes. Many taxpayers confuse marginal and effective rates, believing a higher bracket means all their income is taxed at that rate. This misconception causes some people to turn down raises or extra work unnecessarily. Your marginal rate also affects the value of deductions — a $1,000 deduction saves you $220 if you're in the 22% bracket but $370 if you're in the 37% bracket.
Related Terms
Effective Tax Rate
The average percentage of your total income that you actually pay in federal income tax, calculated by dividing total tax owed by total income.
Tax Bracket
A range of income taxed at a specific rate within the progressive federal income tax system.
Taxable Income
The portion of your income subject to federal income tax, calculated as adjusted gross income minus deductions (standard or itemized).