The U.S. uses a progressive federal income tax system with seven rates: 10%, 12%, 22%, 24%, 32%, 35%, and 37%. Most Americans fall into the 12% or 22% brackets, but the rate you see on paper is not the rate you actually pay on your total income. Understanding how these brackets work, along with payroll taxes and state taxes, gives you a much clearer picture of what you really owe.
How the Seven Federal Tax Brackets Work
The U.S. doesn’t apply a single flat rate to all your income. Instead, your earnings are split into chunks, and each chunk is taxed at progressively higher rates. This is called a marginal tax system. Only the income within each bracket gets taxed at that bracket’s rate, so moving into a higher bracket doesn’t mean all your money is taxed at the higher rate.
For tax year 2026, the brackets for single filers are:
- 10% on income up to $12,400
- 12% on income from $12,401 to $50,400
- 22% on income from $50,401 to $105,700
- 24% on income from $105,701 to $201,775
- 32% on income from $201,776 to $256,225
- 35% on income from $256,226 to $640,600
- 37% on income above $640,600
For married couples filing jointly, each bracket covers roughly double the income range. The 10% bracket applies to income up to $24,800, the 12% bracket covers income up to $100,800, and the top 37% rate kicks in above $768,700.
Your Effective Rate vs. Your Marginal Rate
Your marginal rate is the percentage applied to your last dollar of income. Your effective rate is what you actually pay as a percentage of your total income, and it’s always lower than your marginal rate. Here’s a concrete example: a single filer earning $80,000 in taxable income in 2026 would fall into the 22% bracket, but their tax bill would work out to roughly $12,600. That’s an effective rate of about 15.8%, well below 22%.
This distinction matters because many people overestimate their tax burden by assuming the bracket percentage applies to everything they earn. It doesn’t. The first $12,400 is always taxed at just 10%, the next chunk at 12%, and so on. The 22% rate only applies to the portion of income above $50,400.
The Standard Deduction Lowers Your Starting Point
Before any tax rates apply, most people subtract the standard deduction from their gross income. This deduction reduces the amount of income that’s actually subject to tax. For example, if you earn $60,000 and take a standard deduction of roughly $15,000, only about $45,000 is taxable income. The IRS adjusts the standard deduction for inflation each year, so check the current figure for your filing status when you prepare your return.
You can choose to itemize deductions instead if your mortgage interest, state taxes, charitable giving, and other qualifying expenses add up to more than the standard deduction. Most filers take the standard deduction because it’s simpler and often larger.
Capital Gains Are Taxed Separately
Profits from selling investments held longer than one year, called long-term capital gains, are taxed at lower rates than ordinary income. For 2026, three rates apply:
- 0% if your total taxable income is $49,450 or less (single) or $98,900 or less (married filing jointly)
- 15% if your taxable income falls between $49,451 and $545,500 (single) or $98,901 and $613,700 (joint)
- 20% on taxable income above those thresholds
Short-term capital gains, from assets held one year or less, are taxed at your regular income tax rates. This is one reason financial advisors emphasize holding investments for at least a year before selling. The tax savings can be significant: a single filer in the 24% bracket who sells an investment for a $10,000 profit would owe $2,400 if the gain is short-term, but only $1,500 if it qualifies as long-term.
Payroll Taxes Add to the Total
Federal income tax is only part of what comes out of your paycheck. You also pay FICA taxes, which fund Social Security and Medicare. These are separate from income tax and have their own rates.
Social Security tax is 6.2% on wages up to $184,500 in 2026. Your employer pays a matching 6.2%, for a combined 12.4%. If you’re self-employed, you pay both halves yourself, though you can deduct the employer-equivalent portion on your tax return. Any wages above $184,500 are not subject to Social Security tax.
Medicare tax is 1.45% on all wages with no cap, and your employer matches that as well. High earners pay an additional 0.9% Medicare surtax on wages above $200,000 (single) or $250,000 (married filing jointly). Unlike Social Security, there is no income ceiling for Medicare tax.
For a worker earning $80,000, payroll taxes alone add up to about $6,120 from their paycheck (before the employer’s matching share). Combined with federal income tax, total federal taxes on that salary come closer to 24% of gross pay than the 22% marginal bracket might suggest.
State Income Taxes Vary Widely
Eight states levy no individual income tax at all: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, and Wyoming. If you live in one of these states, federal taxes and payroll taxes are your primary obligations.
The remaining 42 states (plus Washington, D.C.) impose their own income taxes with rates and structures that differ dramatically. Top marginal state rates range from 2.5% on the low end to 13.3% on the high end. Some states use a flat rate applied to all income, while others have progressive brackets similar to the federal system. State income taxes are deductible on your federal return if you itemize, but the deduction is capped.
What You Actually Pay Overall
Your total tax burden combines federal income tax, payroll taxes, and state income tax (if applicable). A single filer earning $75,000 in a state with a moderate 5% income tax rate might pay roughly 12% in federal income tax, 7.65% in payroll taxes, and 4% to 5% in state tax after deductions. That puts the total effective tax rate in the neighborhood of 25%, even though the federal marginal bracket is 22%.
The IRS publishes updated bracket thresholds and standard deduction amounts each fall for the following tax year, adjusting for inflation. Checking these numbers when you do year-end tax planning or adjust your withholding can help you avoid surprises when you file.