Tax Bracket

Category: tax

A range of income levels to which a specific income tax rate is applied.

The US uses a "progressive" tax system. You don’t pay the same rate on every dollar; you pay a higher percentage only on the dollars that fall into the higher brackets. Your "marginal" rate is the tax rate applied to your very last dollar earned.

Common Examples

• Entering a higher tax bracket does not mean your entire income is taxed at that rate, only the amount exceeding the previous bracket floor.
• We projected the client’s year-end income to see if they would drift into a higher tax bracket and need to increase their pre-tax contributions.