The US federal income tax uses a progressive bracket system. Many people believe that earning more can put you in a higher bracket and actually leave you with less money — this is a myth. Understanding how brackets actually work is one of the most practically valuable things you can learn about your finances.
How Brackets Actually Work
Each bracket only applies to income within that range. If you're in the 22% bracket, only the income above the 12% bracket threshold is taxed at 22% — not all of your income. This means your marginal rate (the rate on your last dollar) is always higher than your effective rate (what you actually pay as a percentage of total income).
2024 Federal Tax Brackets (Single Filer)
- 10%: $0 – $11,600
- 12%: $11,601 – $47,150
- 22%: $47,151 – $100,525
- 24%: $100,526 – $191,950
- 32%: $191,951 – $243,725
- 35%: $243,726 – $609,350
- 37%: Over $609,350
A Concrete Example
A single filer earning $60,000 in 2024 pays: 10% on the first $11,600 = $1,160; 12% on $11,601–$47,150 = $4,266; 22% on $47,151–$60,000 = $2,827. Total tax: $8,253. Effective tax rate: $8,253 ÷ $60,000 = 13.8%. Although this person is 'in the 22% bracket,' they paid only 13.8% of income in federal income tax.
Marginal vs Effective Rate
Your marginal rate is the rate you pay on your next dollar of income. Your effective rate is what you actually pay across all your income. When someone says 'I don't want a raise because it'll put me in a higher bracket,' they're confusing marginal and effective rates. A raise always increases your take-home pay — the higher bracket only applies to the additional income above the threshold.
Reducing Your Tax Bill
- Contribute to pre-tax accounts (401k, traditional IRA) to reduce taxable income
- Claim all eligible deductions — standard or itemized, whichever is higher
- Harvest investment losses to offset capital gains
- Consider a Roth IRA if you expect a higher tax rate in retirement
- Use an HSA — triple tax-advantaged (deductible, grows tax-free, withdrawals tax-free for medical)
Your effective federal income tax rate is almost certainly lower than you think. For most middle-income earners, it's between 10–18% — not the top marginal bracket rate you might assume.
Calculate your income tax with our free Income Tax Calculator →