Marginal Tax Rate
Quick Answer
The tax rate applied to your last (or next) dollar of income.
Definition
The tax rate applied to your last (or next) dollar of income.
Explanation
Your marginal rate is the highest tax bracket your income reaches. With progressive taxation, only income within that bracket is taxed at that rate — not your entire income. Understanding your marginal rate helps with decisions about overtime, bonuses, and additional income.
A single filer earning $50,000 falls in the 22% bracket, but their effective rate is much lower because lower portions of income are taxed at 10% and 12%.
Example
Single filer earning $50,000 is in the 22% marginal bracket. One more dollar earned = 22 cents in federal tax. But their effective rate is only about 12%.
Frequently Asked Questions
What is Marginal Tax Rate?
The tax rate applied to your last (or next) dollar of income.
How does Marginal Tax Rate work?
Your marginal rate is the highest tax bracket your income reaches. With progressive taxation, only income within that bracket is taxed at that rate — not your entire income. Understanding your marginal rate helps with decisions about overtime, bonuses, and additional income.A single filer earning $50,000 falls in the 22% bracket, but their effective rate is much lower because lower portions of income are taxed at 10% and 12%.
Can you give an example of Marginal Tax Rate?
Single filer earning $50,000 is in the 22% marginal bracket. One more dollar earned = 22 cents in federal tax. But their effective rate is only about 12%.
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