Marginal Tax Rate
Tax Glossary Term
Definition
Your marginal tax rate is the tax rate applied to your last dollar of taxable income, meaning the rate at the top of your highest tax bracket. In the US progressive tax system, income is stacked into brackets and each bracket is taxed at its own rate. Your marginal rate tells you how much tax you would pay on the next dollar you earn, which makes it the key number for evaluating decisions at the margin: Should you work extra overtime? Take a freelance gig? Convert traditional IRA funds to Roth? The answer depends on your marginal rate. For 2026, the federal brackets for single filers are 10.0% (up to $12,400), 12.0% ($12,401 to $50,400), 22.0% ($50,401 to $105,700), 24.0% ($105,701 to $201,775), 32.0% ($201,776 to $256,225), 35.0% ($256,226 to $640,600), and 37.0% (over $640,600). A common misconception is that moving into a higher bracket means all your income is taxed at the new rate. That is wrong — only the income within that bracket faces the higher rate. Your effective tax rate is always lower than your marginal rate. The marginal rate is also important for evaluating deductions: a $1,000 deduction saves you $220 if you are in the 22.0% bracket, but $370 if you are in the 37.0% bracket. Tax planning strategies like retirement contributions and OBBBA deductions are most valuable for taxpayers in higher marginal brackets.
Example
Single filer, taxable income: $100,000
Top bracket reached: 22.0% (covers $50,401 to $105,700)
Marginal rate: 22.0%
But effective rate is only ~13.4%
An extra $1,000 of income would cost $220 in tax