Your tax bracket explained

The U.S. has a progressive income tax system that can often be confusing. Different amounts of your income are taxed at different rates, so you’ll likely pay a lower percentage of your income in taxes than the tax bracket you fall into. Here’s how it works.

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Your tax bracket explained

The U.S. has a progressive income tax system that can often be confusing. Different amounts of your income are taxed at different rates, so you’ll likely pay a lower percentage of your income in taxes than the tax bracket you fall into. Here’s how it works.

Breaking down the tax brackets

Each bracket of your income is taxed at a different rate. As you make more money, a higher percentage may be owed in taxes.

Taxable income, single filer

Tax rate

10% $9,700 or less

12% $9,701 to $39,475

22% $39,476 to $84,200

24% $84,201 to $160,725

32% $160,726 to $204,100

35% $204,101 to $510,300

37% $510,301 or more

Taxable income, married and filing jointly

Tax rate

10% $19,400 or less

12% $19,401 to $78,950

22% $78,951 to $168,400

24% $168,401 to $321,450

32% $321,451 to $408,200

35% $408,201 to $612,350

37% $612,351 or more

Source: U.S. Congress, 2019

So what does this mean?

Joe is single and has $50,000 in taxable income. Let’s calculate his taxes.

From $0 to $9,700, Joe is taxed at 10%.

$9,700 x 10% = $970

From $9,701 to $39,475, Joe is taxed at 12%.

$29,775 x 12% = $3,573

From $39,476 to $50,000, Joe is taxed at 22%.

$10,525 x 22% = $2,315

TOTAL TAX = $6,858

Joe’s marginal tax rate—the rate he pays on his top bracket—is 22%. But in reality, Joe’s

tax liability—his effective tax rate—is about 14% of his taxable income.

Lisa is single and has $100,000 in taxable income.

From $0 to $9,700, Lisa is taxed at 10%.

$9,700 x 10% = $970

From $9,701 to $39,475, Lisa is taxed at 12%.

$29,775 x 12% = $3,573

From $39,476 to $84,200, Lisa is taxed at 22%.

$44,724 x 22% = $9,840

From $84,201 to $100,000, Lisa is taxed at 24%.

$15,800 x 24% = $3,792

TOTAL TAX = $18,175

Lisa’s marginal tax rate is 24%. But in reality, Lisa’s tax liability gives her an effective tax rate of about 18%.

Say Lisa and Joe fall in love and get married. They decide to file a joint tax return, with a combined taxable income of $150,000.

The first $19,400 they make is taxed at 10%.

$19,400 x 10% = $1,940

From $19,401 to $78,950, they are taxed at 12%.

$59,550 x 12% = $7,146

From $78,951 to $150,000, they are taxed at 22%.

$71,050 x 22% = $15,631 

TOTAL TAX = $24,717

If they had stayed single, Joe and Lisa would have paid a combined $25,033. Filing jointly saves them $316, sometimes referred to as a “marriage benefit.”

If Joe and Lisa’s tax liability had been higher as a married couple filing jointly, the extra funds owed would be referred to as a “marriage penalty.”

But that’s not all …

Different credits and deductions based on life events could affect Joe and Lisa’s tax liability.

If they start a family, they may qualify for new deductions and child care credits, and their tax liability would likely shrink.

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The material provided on this website is for informational use only and is not intended for financial, tax or investment advice. Bank of America and/or its affiliates, and Khan Academy, assume no liability for any loss or damage resulting from one’s reliance on the material provided. Please also note that such material is not updated regularly and that some of the information may not therefore be current. Consult with your own financial professional and tax advisor when making decisions regarding your financial situation.

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