The federal income tax uses seven brackets with rates of 10%, 12%, 22%, 24%, 32%, 35%, and 37%. Each rate applies only to the income that falls within that bracket’s range, not to your entire income. This system means your tax bill rises gradually as you earn more, rather than jumping all at once when you cross into a higher bracket.
How Tax Brackets Actually Work
Tax brackets are income ranges, each taxed at a specific rate. The key concept is that they’re marginal, meaning each rate only applies to the dollars earned within that range. Your first chunk of taxable income is always taxed at 10%, regardless of how much you make in total. The next chunk is taxed at 12%, the next at 22%, and so on up through 37% for the highest earners.
Here’s a practical example. Say you’re a single filer with $80,000 in taxable income. You don’t owe 22% on the full $80,000. Instead, the first portion is taxed at 10%, the next portion at 12%, and only the income above the 22% threshold is taxed at that higher rate. Your actual tax bill ends up being significantly less than if the 22% rate applied to every dollar.
This is the difference between your marginal tax rate and your effective tax rate. Your marginal rate is the percentage applied to your last dollar of income, the highest bracket you reach. Your effective rate is the total tax you owe divided by your total income. For most people, the effective rate is noticeably lower than the marginal rate. Someone in the 22% bracket, for instance, might have an effective rate closer to 13% or 14%.
Taxable Income vs. Gross Income
The bracket thresholds apply to your taxable income, not your total earnings. Before your income hits the bracket system, you subtract either the standard deduction or your itemized deductions. For 2026, the standard deduction is $16,100 for single filers, $32,200 for married couples filing jointly, and $24,150 for heads of household.
This means a single person earning $60,000 in gross income doesn’t have $60,000 flowing through the brackets. After the standard deduction, their taxable income drops to around $43,900. That lower figure is what determines which brackets apply and how much tax you owe. Other adjustments, like contributions to a traditional IRA or health savings account, can reduce your taxable income further before the brackets come into play.
Filing Status Changes Your Brackets
The dollar ranges for each bracket differ depending on how you file. Married couples filing jointly get wider brackets, meaning more of their combined income is taxed at lower rates compared to a single filer. Head of household filers, generally single parents supporting dependents, also get wider brackets than single filers but narrower ones than joint filers.
This is why getting married can sometimes lower a couple’s combined tax bill. If one spouse earns significantly more than the other, the higher earner’s income gets spread across the wider joint brackets, reducing the marginal rate on some of that income. When both spouses earn similar high incomes, though, the combined income can push more dollars into higher brackets than if each filed as a single person, which is commonly called the “marriage penalty.”
Brackets Adjust for Inflation Each Year
The IRS adjusts bracket thresholds annually based on inflation. This prevents “bracket creep,” where a cost-of-living raise pushes you into a higher bracket even though your purchasing power hasn’t changed. The standard deduction also adjusts with inflation. These updates are typically announced in the fall for the following tax year.
Because of these annual adjustments, the exact dollar thresholds shift slightly each year. You can find the current year’s thresholds on the IRS website or in the instructions for Form 1040.
Capital Gains Use Separate Brackets
Income from selling investments held longer than a year (long-term capital gains) is taxed under a different, generally lower bracket system with three rates: 0%, 15%, and 20%. For 2026, single filers pay 0% on long-term capital gains if their taxable income stays below $49,450. The 15% rate kicks in above that threshold, and the 20% rate applies once taxable income exceeds $545,500. For married couples filing jointly, those thresholds are $98,900 and $613,700.
Short-term capital gains on assets held one year or less don’t get this treatment. They’re taxed as ordinary income, flowing through the same seven brackets as your wages.
How to Figure Out Your Bracket
Start with your gross income from all sources: wages, freelance earnings, interest, rental income, and so on. Subtract the standard deduction (or your itemized deductions if they’re higher). The result is your taxable income. Find where that number lands in the bracket table for your filing status, and that’s your marginal bracket.
Knowing your bracket helps with practical decisions throughout the year. If you’re near the top of the 12% bracket, for example, a traditional 401(k) contribution that reduces your taxable income saves you 12 cents per dollar contributed. If you’re in the 24% bracket, that same contribution saves 24 cents per dollar. The higher your bracket, the more valuable tax-deductible contributions and deductions become in real dollar terms.