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.

Show text version
Close text version

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.

Tax rate
Taxable income, single filer
Taxable income, married and filing jointly

10% $9,525 or less $19,050 or less

12% $9,526 to $38,700 $19,051 to $77,400

22% $38,701 to $82,500 $77,401 to $165,000

24% $82,501 to $157,500 $165,001 to $315,000

32% $157,501 to $200,000 $315,001 to $400,000

35% $200,001 to $500,000 $400,001 to $600,000

37% $500,001 or more $600,001 or more

Source: U.S. Congress, 2018

So what does this mean?

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

From $0 to $9,525, Joe is taxed at 10%.
$9,525 x 10% = $953

From $9,526 to $38,700, Joe is taxed at 12%.
$29,174 x 12% = $3,501

From $38,701 to $50,000, Joe is taxed at 22%.
$11,299 x 22% = $2,486

TOTAL TAX = $6,940

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 $9,525, Lisa is taxed at 10%.
$9,525 x 10% = $953

From $9,526 to $38,700, Lisa is taxed at 12%.
$29,174 x 12% = $3,501

From $38,701 to $82,500, Lisa is taxed at 22%.
$43,799 x 22% = $9,636

From $82,501 to $100,000, Lisa is taxed at 24%.
$17,499 x 24% = $4,200

TOTAL TAX = $18,290

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 $19,050 they make is taxed at 10%.
$19,050 x 10% = $1,905

From $19,051 to $77,400, they are taxed at 12%.
$58,349 x 12% = $7,002

From $77,401 to $150,000, they are taxed at 22%.
$72,599 x 22% = $15,972

TOTAL TAX = $24,879

If they had stayed single, Joe and Lisa would have paid a combined $25,230. Filing jointly saves them $351, 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.

Close Disclaimer
The material provided on this website is for informational use only and is not intended for financial 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 when making decisions regarding your financial or investment options.

Up Next

Contact Us

  • Mon-Fri 8 a.m. to midnight Eastern Sat 8 a.m.-8 p.m. Eastern, Sun 9 a.m.-8 p.m. Eastern
    866.736.2205 Mon-Fri 8 a.m. to midnight Eastern
    Sat 8 a.m.-8 p.m. Eastern, Sun 9 a.m.-8 p.m. Eastern
  • Schedule an appointment

Neither Bank of America Corporation nor any of its affiliates or financial advisors provide legal, tax or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions.