By Gayle SatoHow Do Tax Brackets Work?
Quick Answer
Tax brackets are income ranges that help determine what your federal tax bill will be. The IRS defines seven different tax brackets, each with its own marginal tax rate that increases as your income increases.
Tax brackets are income ranges that help determine the taxes you pay on your federal income tax return. Most of us have heard of tax brackets, but not everybody understands what they are or how they work.
The IRS calculates your federal income taxes using a system that taxes the lowest portion of your income at the lowest rate and the remainder of your income at progressively higher rates. Knowing how this system works can help you better understand how your tax bill is calculated—and how federal income taxes work. Here's what you need to know to understand tax brackets.
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How Do Tax Brackets Work?
Tax brackets are part of a tiered system of tax rates—officially, marginal tax rates—used to calculate your federal income taxes. You pay the lowest marginal tax rate on your lowest tier of income and progressively higher rates as your income increases. Each income tier is known as a tax bracket.
To calculate (or estimate) your taxes, you need these four key pieces of information:
- Taxable income: Your total income minus standard or itemized deductions
- Filing status: Unmarried, head of household, married filing separately or married filing jointly
- Marginal tax rates: The IRS percentages used to calculate what you owe in taxes
- Tax brackets: The ranges of income that match up with each marginal tax rate
Learn more: What Qualifies as Taxable Income?
Here's a quick example of how tax brackets work. Using the 2024 tax rates and brackets shown below, a person filing head of household and earning $65,000 in taxable income would pay 10% in taxes on their first $16,550 of income, 12% on their next $46,550 (or $63,100 - $16,550) and 22% on their remaining $1,900 of income.
What's Your Tax Bracket?
When someone mentions their tax bracket (or asks about yours), they're referencing their top marginal tax rate. In the example above, $65,000 in taxable income tops out at the 22% marginal tax rate, placing our taxpayer in the 22% tax bracket.
How Many Tax Brackets Are There?
There are seven different tax brackets defined by income level, each one with its own tax rate: 10%, 12%, 22%, 24%, 32%, 35% and 37%. Although the tax rates haven't changed since they were revised under the Tax Cuts and Jobs Act of 2017, the income levels that define each tax bracket are adjusted annually for inflation.
Federal Tax Brackets for 2024
Here are the marginal tax rates and tax brackets used to calculate your federal income taxes for the 2024 tax year (for taxes due in April 2025).
| Tax Rate | Single | Head of Household | Married Filing Separately | Married Filing Jointly |
|---|---|---|---|---|
| 10% | Up to $11,600 | Up to $16,550 | Up to $11,600 | Up to $23,200 |
| 12% | $11,601 to $47,150 | $16,551 to $63,100 | $11,601 to $47,150 | $23,201 to $94,300 |
| 22% | $47,151 to $100,525 | $63,101 to $100,500 | $47,151 to $100,525 | $94,301 to $201,050 |
| 24% | $100,526 to $191,950 | $100,501 to $191,950 | $100,526 to $191,950 | $201,051 to $383,900 |
| 32% | $191,951 to $243,725 | $191,951 to $243,700 | $191,951 to $243,725 | $383,901 to $487,450 |
| 35% | $243,726 to $609,350 | $243,701 to $609,350 | $243,726 to $365,600 | $487,451 to $731,200 |
| 37% | Over $609,350 | Over $609,350 | Over $365,600 | Over $731,200 |
Source: IRS
Federal Tax Brackets for 2025
Tax brackets are adjusted every year for inflation. Below are the tax brackets for 2025 (for taxes due in April 2026). Because of inflation adjustments, you might pay slightly lower taxes if you have the same income in 2025 vs. 2024.
| Tax Rate | Single | Head of Household | Married Filing Separately | Married Filing Jointly |
|---|---|---|---|---|
| 10% | Up to $11,925 | Up to $17,000 | Up to $11,925 | Up to $23,850 |
| 12% | $11,926 to $48,475 | $17,001 to $64,850 | $11,926 to $48,475 | $23,851 to $96,950 |
| 22% | $48,476 to $103,350 | $64,851 to $103,350 | $48,476 to $103,350 | $96,951 to $206,700 |
| 24% | $103,351 to $197,300 | $103,351 to $197,300 | $103,351 to $197,300 | $206,701 to $394,600 |
| 32% | $197,301 to $250,525 | $197,301 to $250,500 | $197,301 to $250,525 | $394,601 to $501,050 |
| 35% | $250,526 to $626,350 | $250,501 to $626,350 | $250,526 to $375,800 | $501,051 to $751,600 |
| 37% | Over $626,350 | Over $626,350 | Over $375,800 | Over $751,600 |
Source: IRS
Tax Brackets Example
A quick example might make it easier to visualize how tax brackets work. Using 2024 tax brackets, here's how you might calculate your tax bill if you're a single taxpayer with $80,000 in taxable income.
| Income Tax Single Taxpayer $80,000 Income | Tax Rate | Taxes Owed |
|---|---|---|
| Bracket 1 (Up to $11,600) Taxed at 10% | 10% x $11,600 | $1,160 |
| Bracket 2 ($11,601 to $47,150) Taxed at 12% | 12% x $35,549 | $4,266 |
| Bracket 3 ($47,151 to $100,525) Taxed at 22% | 22% x $32,849 | $7,227 |
| Total Tax Bill | $12,653 |
In this example, your income falls in the 22% tax bracket. But, as you can see, even if some of your income is taxed at 22%, your tax bill does not equal 22% of your total taxable income. Because the first bracket is taxed at 10% and the second one at 12%, in our example your total tax bill has an effective tax rate of just under 15.8%.
If you receive a bonus or other additional income, you might want to set aside money for taxes according to your top marginal rate (in this example, 22%). Also, if your income outgrows your current bracket, you'll move into the next tax bracket and pay a higher rate on those additional dollars.
How to Find Your Tax Bracket
Follow these steps to quickly estimate your tax bracket:
- Check last year's tax return. Check line 15 of your most recent tax return (Form 1040) to find last year's taxable income. If your income is fairly consistent from year to year, use this number as your estimate.
- Or, estimate your current income. Add up your income for the year, including wages, interest, capital gains, side income, business profits, IRA distributions and so on. Subtract standard or itemized deductions. Your total income minus deductions is your estimated taxable income.
- Find your tax bracket. Find your taxable income on the 2024 or 2025 tax tables shown above. The tax bracket and marginal rate that contains your income is your top marginal rate, or tax bracket.
Learn more: What Is the Standard Deduction for 2025?
The Bottom Line
Knowing how tax brackets work can help you better understand how your income is taxed. Your top marginal tax rate, or what people commonly refer to as your tax bracket, is not the same thing as your effective tax rate. Being in the 24% tax bracket doesn't mean paying 24% of your income in taxes. Instead, your income is taxed progressively through a series of marginal tax rates, up to 24%.
Your tax bracket can help you estimate how much tax you'll owe on any additional income you make: bonuses, capital gains, gig income or lottery winnings. If you really do win the lottery (or score another large windfall), your additional income may kick you into a higher tax bracket. Even so, you'll be taxed according to the same progressive system of rates and brackets; you'll just top out in a higher bracket.
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About the author
Gayle Sato
Gayle Sato writes about financial services and personal financial wellness, with a special focus on how digital transformation is changing our relationship with money. As a business and health writer for more than two decades, she has covered the shift from traditional money management to a world of instant, invisible payments and on-the-fly mobile security apps.
Read more from Gayle