Understanding US Income Tax Brackets: A Complete Guide
Learn how federal income tax brackets work, understand marginal vs. effective tax rates, and discover strategies to optimize your tax situation legally.
How US Income Tax Brackets Work
The US uses a progressive tax system where income is taxed at increasingly higher rates as it increases. However, many people misunderstand how this works, believing that moving into a higher tax bracket means all their income is taxed at the higher rate. This is incorrect.
In reality, only the income within each bracket is taxed at that bracket's rate. This means you never "lose money" by earning more - you only pay the higher rate on income above each threshold.
2026 Federal Tax Brackets
Single Filers
| Tax Rate | Income Range |
|---|---|
| 10% | $0 to $11,925 |
| 12% | $11,926 to $48,475 |
| 22% | $48,476 to $103,350 |
| 24% | $103,351 to $197,300 |
| 32% | $197,301 to $250,525 |
| 35% | $250,526 to $626,350 |
| 37% | Over $626,350 |
Married Filing Jointly
| Tax Rate | Income Range |
|---|---|
| 10% | $0 to $23,850 |
| 12% | $23,851 to $96,950 |
| 22% | $96,951 to $206,700 |
| 24% | $206,701 to $394,600 |
| 32% | $394,601 to $501,050 |
| 35% | $501,051 to $751,600 |
| 37% | Over $751,600 |
Use our income tax calculator to estimate your federal tax liability.
Marginal vs. Effective Tax Rate
Marginal Tax Rate
Your marginal rate is the tax bracket where your last dollar of income falls. If you earn $100,000 as a single filer, your marginal rate is 22% because that income falls in the $48,476 to $103,350 bracket.
Effective Tax Rate
Your effective rate is the actual percentage of your total income paid in taxes. It is always lower than your marginal rate because lower portions of income are taxed at lower rates.
Example Calculation
For a single filer earning $100,000 in taxable income:
- 10% on first $11,925 = $1,192.50
- 12% on next $36,550 ($11,926 to $48,475) = $4,386
- 22% on remaining $51,525 ($48,476 to $100,000) = $11,335.50
- Total tax: $16,914
- Effective rate: 16.9%
Understanding Taxable Income
Tax brackets apply to taxable income, not gross income. Taxable income is calculated by subtracting deductions from your adjusted gross income (AGI).
Standard Deduction (2026)
- Single: $15,000
- Married Filing Jointly: $30,000
- Head of Household: $22,500
Above-the-Line Deductions
These reduce AGI before applying the standard deduction:
- Traditional IRA contributions (up to $7,000; $8,000 if 50+)
- Health Savings Account contributions
- Student loan interest (up to $2,500)
- Self-employment tax (50%)
Itemized Deductions
If these exceed the standard deduction, itemize instead:
- State and local taxes (SALT) - capped at $10,000
- Mortgage interest on up to $750,000 of debt
- Charitable contributions
- Medical expenses exceeding 7.5% of AGI
Tax Credits vs. Deductions
Credits directly reduce your tax bill, making them more valuable than deductions which only reduce taxable income.
Common Tax Credits
- Child Tax Credit: Up to $2,000 per qualifying child
- Earned Income Credit: Up to $7,830 for families with 3+ children
- Education Credits: American Opportunity (up to $2,500) or Lifetime Learning (up to $2,000)
- Child Care Credit: Up to 35% of qualified expenses
- Retirement Savings Credit: Up to $1,000 for low-to-moderate income savers
Legal Tax Reduction Strategies
Maximize Retirement Contributions
401(k) contributions reduce taxable income dollar-for-dollar. In 2026, you can contribute up to $23,500 ($31,000 if 50+). This could save you thousands in taxes while building retirement savings.
Use HSA Triple Tax Advantage
Health Savings Accounts offer tax-free contributions, tax-free growth, and tax-free withdrawals for medical expenses. The 2026 limit is $4,300 individual / $8,550 family.
Tax-Loss Harvesting
Sell losing investments to offset capital gains. You can deduct up to $3,000 in net losses against ordinary income, carrying forward excess losses to future years.
Timing Income and Deductions
If your income varies year to year, consider timing strategies:
- Defer income to years when you expect lower rates
- Accelerate deductions into high-income years
- Bunch charitable giving into high-income years
Consider Roth Conversions
In years with lower income, converting traditional IRA funds to Roth can make sense. You pay taxes now at lower rates, then enjoy tax-free growth and withdrawals later.
State Income Taxes
Federal taxes are only part of the picture. Most states also impose income tax:
- No state income tax: Alaska, Florida, Nevada, New Hampshire (dividends/interest only), South Dakota, Tennessee, Texas, Washington, Wyoming
- Flat tax states: Colorado, Illinois, Indiana, Kentucky, Massachusetts, Michigan, North Carolina, Pennsylvania, Utah
- Highest rates: California (13.3%), Hawaii (11%), New Jersey (10.75%), Oregon (9.9%)
Common Tax Mistakes to Avoid
- Missing deductions: Track all potential deductions year-round
- Wrong filing status: Head of Household offers better rates than Single for qualifying single parents
- Ignoring estimated taxes: Self-employed and gig workers must pay quarterly or face penalties
- Not adjusting withholding: Review your W-4 after major life changes
- Missing retirement contribution deadlines: IRA contributions can be made until April tax deadline
Conclusion
Understanding how tax brackets work empowers you to make informed financial decisions. Remember that your marginal rate only applies to income in that bracket, and many strategies exist to legally reduce your tax burden.
Use our income tax calculator to estimate your liability, our salary calculator to understand your take-home pay, and consult with a tax professional for complex situations.
CalcOnce Editorial Team
The CalcOnce team creates comprehensive guides and free calculators to help you make better decisions. Our content is researched thoroughly and updated regularly to ensure accuracy.