Tax Brackets
What They Really Mean for Your Paycheck
One of the most common tax myths is that moving into a higher tax bracket means “all your income is taxed at that higher rate.” That’s not how it works.
Tax brackets are marginal, meaning only the portion of your income within each range is taxed at that rate. Let’s break it down step by step so it finally makes sense.
How Tax Brackets Work
The U.S. federal income tax system is progressive. That means the more you earn:
The more you earn, the higher the rate applied to the top slice of your income.
Each bracket applies only to income within that range, not your entire paycheck.
Think of it like climbing stairs: you pay a little tax on the first step, a higher percentage on the next step, and so on. But you never go back and pay the higher rate on the steps you already climbed.
2025 Federal Income Tax Brackets (Single Filers)
(Note: married filers, heads of household, and other statuses have slightly different brackets, but the principle is the same.)
Income | Tax Bracket (approx % you will pay in taxes) |
|---|---|
Up to $11,600 | 10% |
$11,601 – $47,150 | 12% |
$47,151 – $100,525 | 22% |
$100,526 – $191,950 | 24% |
$191,951 – $243,725 | 32% |
$243,726 – $609,350 | 35% |
Over $609,350 | 37% |
(Source: IRS, 2025 inflation-adjusted tax brackets)
Example 1: Income of $50,000
If you earn $50,000 as a single filer, here’s how your income is taxed:
First $11,600→ taxed at 10% = $1,160
Next $35,550 ($11,601 to $47,150) → taxed at 12% = $4,266
Last $2,850 ($47,151 to $50,000) → taxed at 22% = $627
Total federal tax = $6,053 (before credits/deductions).
Even though you’re “in the 22% bracket,” your effective tax rate is about 12%, because most of your income was taxed at lower rates.
Example 2: The Raise Myth
Say you earn $47,000 and get a $1,000 raise, bringing your income to $48,000. Many people panic, thinking, “Now all my income is taxed at 22%!”
Here’s what actually happens:
Only the $850 over $47,150 is taxed at 22%.
The rest of your income stays in the 10% and 12% brackets.
Your raise still increases your take-home pay you don’t lose money by moving up a bracket.
Other Things That Affect Your Taxes
Deductions & Credits: Standard deduction (in 2025: $14,600 for single filers) and tax credits (like the Earned Income Credit or Child Tax Credit) reduce your taxable income or tax bill.
State Taxes: Many states have their own brackets, which can be flat or progressive.
Withholding: Your W-4 determines how much tax is taken out of each paycheck, which affects your refund or amount owed.
Why Understanding Brackets Matters
Budgeting: Knowing your effective tax rate helps you understand your real take-home pay.
Raises & Job Offers: You can calculate how much of that raise or new salary you’ll actually see.
Planning Ahead: Helps you decide on tax-advantaged moves like contributing to a 401(k) or IRA, which can lower your taxable income.
Tax brackets don’t punish you for earning more. They simply divide your income into layers, each taxed at its own rate. Once you see the math, it’s much easier to understand how your paycheck is really affected.
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