tax
Marginal Tax Rate
Your marginal tax rate is the rate you pay on the last dollar of income earned — the rate of the highest tax bracket you fall into. It is not the rate applied to your entire income.
In a progressive tax system, income is taxed in slices. The first slice (up to a threshold) is taxed at a low rate; each higher slice is taxed at a higher rate. Your marginal rate is just the rate on the top slice.
A single US filer earning $80,000 in 2025 has a marginal rate of 22% — but they don't pay 22% on all $80,000. They pay 10% on the first $11,925, 12% on the next slice, and 22% only on income above $48,475.
Knowing your marginal rate matters for decisions like whether to contribute to a Roth IRA (paying tax now) or a traditional 401k (deferring tax).
Related terms
- Effective Tax Rate
- Your effective tax rate is your total tax paid divided by your total income, expressed as a percentage. It is always lower than your marginal rate in a progressive tax system.
- Tax Bracket
- A tax bracket is a range of income taxed at a specific rate in a progressive tax system. Each bracket rate applies only to the income within that range, not to your entire income.
- Standard Deduction
- The standard deduction is a fixed amount the IRS lets US taxpayers subtract from gross income before calculating tax, without itemising individual deductions. For 2025: $15,750 (single) or $31,500 (married filing jointly), as raised by the One Big Beautiful Bill Act.
Frequently asked questions
What is Marginal Tax Rate?
Your marginal tax rate is the rate you pay on the last dollar of income earned — the rate of the highest tax bracket you fall into. It is not the rate applied to your entire income.