What Is the Marginal Federal Income Tax Rate?

The marginal federal income tax rate is the rate of tax paid on the next dollar of income a person earns. It is a part of the United-States’s progressive tax system. This rate is important for financial planning, as it impacts the value of earning more income or the benefit of taking additional tax deductions. It represents the tax on the highest segment of your earnings, not your total income.

Federal Income Tax Brackets Explained

The U.S. federal government uses a progressive tax system, which means that as income increases, it is taxed at progressively higher rates. This structure is organized into seven tax brackets for 2025, with rates of 10%, 12%, 22%, 24%, 32%, 35%, and 37%. Each bracket corresponds to a specific range of taxable income, and these income ranges are adjusted annually for inflation by the Internal Revenue Service (IRS). The income thresholds vary based on a taxpayer’s filing status, such as Single, Married Filing Jointly, or Head of Household.

As you earn income, you fill the first tax bracket, which is taxed at the lowest rate. Once that bracket is full, any additional income spills over into the next bracket and is taxed at the next highest rate. No matter how high your total income is, the first dollars you earn are always taxed at the lowest rate.

2025 Federal Income Tax Brackets

| Tax Rate | Single Filers | Married Filing Jointly | Head of Household |
| — | — | — | — |
| 10% | $0 to $11,925 | $0 to $23,850 | $0 to $17,000 |
| 12% | $11,926 to $48,475 | $23,851 to $96,950 | $17,001 to $64,850 |
| 22% | $48,476 to $103,350 | $96,951 to $206,700 | $64,851 to $103,350 |
| 24% | $103,351 to $197,300 | $206,701 to $394,600 | $103,351 to $197,300 |
| 32% | $197,301 to $250,525 | $394,601 to $501,050 | $197,301 to $250,525 |
| 35% | $250,526 to $626,350 | $501,051 to $751,600 | $250,526 to $626,35 0 |
| 37% | Over $626,350 | Over $751,600 | Over $626,350 |

Determining Your Taxable Income

The income figures in the tax brackets apply to your taxable income, not your total gross earnings. This figure is calculated starting with your gross income, which includes all money you receive from sources like wages, investments, and self-employment. From this amount, you subtract specific “above-the-line” deductions to arrive at your Adjusted Gross Income (AGI). These can include contributions to a traditional IRA, student loan interest, or educator expenses.

Once AGI is determined, you can reduce your income by taking either the standard deduction or itemized deductions. The standard deduction is a fixed dollar amount that the IRS allows you to subtract, with the amount depending on your filing status, age, and whether you are blind. For 2025, the standard deduction for single filers is $15,000, for married couples filing jointly it is $30,000, and for head of household filers it is $22,500.

Alternatively, you can itemize deductions if the total of your specific deductible expenses exceeds your available standard deduction. Common itemized deductions include state and local taxes (SALT), which are capped at $10,000 per household per year, mortgage interest, and charitable contributions. This final figure is your taxable income, which is used to calculate your tax liability.

Calculating Your Federal Income Tax

For example, consider a single individual with a taxable income of $50,000 in 2025. This person’s income is taxed in pieces according to the brackets, not by a simple multiplication of $50,000 by a single tax rate. Each portion of income that falls into a bracket is taxed at that bracket’s rate.

The first $11,925 of their income is taxed at the 10% rate, resulting in a tax of $1,192.50. The next portion of their income, from $11,926 up to $48,475, falls into the 12% bracket for a tax of $4,385.88. The remaining income, from $48,476 to $50,000, falls into the 22% bracket for a tax of $335.50.

To find the total federal income tax liability, you sum the tax calculated for each bracket, which in this example is $5,913.88. Although this individual’s income reaches into the 22% bracket, only a small part of their income is taxed at that rate. For this person, the marginal tax rate is 22%, because that is the rate applied to the last dollar they earned.

Marginal Rate vs Effective Tax Rate

The marginal tax rate differs from the effective tax rate. The marginal rate is useful when making financial decisions, such as evaluating the tax impact of a salary increase or the benefit of a tax-deductible contribution.

The effective tax rate, on the other hand, provides a more holistic view of your tax burden. It is calculated by dividing your total tax liability by your total gross income. Using the prior example, if the individual’s gross income was $65,000 before taking the $15,000 standard deduction, their effective tax rate would be approximately 9.1% ($5,913.88 total tax / $65,000 gross income).

This effective rate is lower than the marginal rate for anyone whose income spans more than one tax bracket. The marginal rate tells you the tax impact of your next financial move, while the effective tax rate shows what percentage of your total earnings you paid in federal income tax.