Tax brackets are widely misunderstood. Moving into a higher bracket does not raise the tax on all of your income, only on the dollars above the threshold. Seeing your tax split bracket by bracket, and the gap between your marginal and effective rates, makes decisions like a raise, a 401(k) contribution or itemizing much easier to judge.
How federal income tax brackets work
The U.S. uses a progressive system with seven rates: 10%, 12%, 22%, 24%, 32%, 35% and 37%. Each rate applies only to the slice of taxable income inside its bracket. For a single filer in 2026, the first $12,400 is taxed at 10%, income from $12,400 to $50,400 at 12%, and so on. Married couples filing jointly get brackets roughly twice as wide.
Your marginal rate is the rate on your last dollar of taxable income; it tells you what an extra dollar of income costs or what an extra deduction saves. Your effective rate is total tax divided by gross income, and it is always lower, because the lower brackets and the deduction shelter part of your pay.
Worked example: a single filer earning $85,000
A single filer earns $85,000 and puts $5,000 into a traditional 401(k). Taxable income is $85,000 − $5,000 − the $16,100 standard deduction = $63,900. The first $12,400 is taxed at 10% ($1,240), the next $38,000 at 12% ($4,560) and the last $13,500 at 22% ($2,970).
Federal income tax comes to $8,770. The marginal rate is 22%, but the effective rate is only 10.32% of gross income, leaving $76,230 after federal income tax. A married couple filing jointly on $150,000 with $10,000 of pre-tax deductions would owe $13,140, an effective rate of 8.8%.
Ways to lower your taxable income
Pre-tax contributions to a traditional 401(k), 403(b), HSA or FSA come off your income before the brackets apply, so each dollar saves tax at your marginal rate. Itemizing helps only when mortgage interest, state and local taxes, and charitable gifts add up to more than the standard deduction; the calculator uses whichever is larger. Tax credits, which this estimate does not include, reduce the tax itself rather than taxable income. Contributions to a traditional 401(k) lower taxable income before these brackets apply.
Limits and assumptions
This is an estimate of federal income tax on ordinary income for tax year 2026. It does not include tax credits such as the Child Tax Credit or EITC, the alternative minimum tax, the net investment income tax, lower capital-gains and qualified-dividend rates, self-employment tax, Social Security and Medicare, or state and local income tax. Use it to understand your brackets, and use tax software or a professional for your actual return.
Key terms
- Taxable income
- Gross income minus pre-tax deductions and the standard or itemized deduction; the amount the brackets apply to.
- Marginal tax rate
- The rate that applies to your next dollar of taxable income, set by the highest bracket you reach.
- Effective tax rate
- Total federal income tax divided by gross income, the average share of your income that goes to the tax.
- Standard deduction
- A flat amount set by the IRS each year that you subtract from income: $16,100 for single filers and $32,200 for joint filers in 2026.
- Itemized deductions
- Specific expenses, such as mortgage interest, state and local taxes and charitable gifts, that you can deduct instead of the standard deduction.