How tax brackets actually work
What this Tax Bracket Calculator does (and what it doesn’t)
A “tax bracket” is the highest (marginal) federal income tax rate that applies to your next dollar of taxable income. This calculator helps you quickly answer three questions:
- What is my marginal tax bracket? (10%, 12%, 22%, 24%, 32%, 35%, or 37%)
- How much federal income tax would I owe? (based on progressive brackets)
- What’s my effective tax rate? (total tax ÷ income)
Important: This is an estimate for federal income tax only. It does not include payroll taxes (Social Security/Medicare), state/local taxes, tax credits, special capital gains rates, the Net Investment Income Tax, or AMT. Real returns can differ once credits, deductions, and special rules apply.
Tax bracket vs. effective tax rate (the mistake everyone makes)
The U.S. federal income tax system is progressive. That means your income is taxed in “layers.” When you move into a higher bracket, you do not pay that higher rate on all your income—only on the portion that falls inside that bracket. So if your marginal bracket is 24%, your effective rate could still be 9%–18% depending on deductions and how much income sits in the lower brackets.
Inputs explained
- Tax year: Choose the bracket table you want to use (2024 or 2025).
- Filing status: Brackets differ for Single, Married Filing Jointly (MFJ), Married Filing Separately (MFS), and Head of Household (HOH).
- Income type: If you enter gross income, the calculator can subtract either the standard deduction or your itemized deduction estimate to get taxable income. If you already know your taxable income, choose that mode and skip deductions.
- Deductions: Standard deduction is a fast default. Itemizing can make sense if you have high mortgage interest, state/local taxes (SALT), charitable gifts, or medical expenses (subject to rules).
How the math works (formula breakdown)
Let:
- GI = gross income (or total income in this simplified model)
- D = deduction (standard or itemized)
- TI = taxable income
First we compute taxable income:
TI = max(0, GI − D)
Then we compute your federal tax using progressive brackets. Each bracket has a rate r and a taxable range from a to b. The tax contributed by that bracket is:
Taxbracket = r × max(0, min(TI, b) − a)
Total tax is the sum over all brackets. Your marginal rate is the rate on the top bracket that your taxable income reaches. Finally, your effective tax rate is:
Effective rate = Total tax ÷ GI
(You can also view an “effective on taxable” rate = Total tax ÷ TI.)
Worked examples
Example 1: Single filer, 2025, gross income $90,000, standard deduction
Assume Single filing status in 2025 and you take the standard deduction. If your gross income is $90,000 and the standard deduction is $15,750, then taxable income is:
TI = 90,000 − 15,750 = 74,250
That puts you in the 22% marginal bracket (because your taxable income is above the 12% ceiling and within the 22% range). Your total tax is the sum of:
- 10% on the first slice
- 12% on the next slice
- 22% on the remaining slice up to $74,250
Your effective rate will be much lower than 22% because large portions of your income are taxed at 10% and 12%—and because the deduction reduced taxable income.
Example 2: Married filing jointly, 2024, taxable income $120,000
If you already know taxable income is $120,000 (after deductions) and you’re MFJ in 2024, your marginal bracket is 22% because $120,000 sits within the MFJ 22% range. The calculator will apply 10% to the first MFJ bracket, 12% to the next, and 22% to the remainder.
How to use this calculator for “viral” decisions
- “Should I take the raise?” People panic when a raise “puts them in a higher bracket.” Plug in your current vs. new income and show that only the top slice is taxed higher.
- Bonus season reality check: If your bonus looks “over-taxed,” compare your withholding vs. your true bracket-based estimate (then check your tax return outcome).
- Deduction hacks: Try switching from standard to itemized and see how much taxable income drops. Then test “what if I contribute $X more to a traditional 401(k)?” by lowering gross income.
- Side hustle planning: Add estimated net side-hustle profit and see what bracket your incremental income lands in.
FAQs
1) If I move into a higher bracket, do I lose money?
No. You only pay the higher rate on the income inside that bracket. The income below it is still taxed at the lower rates. A higher bracket means you earned more—not that all income got “re-taxed.”
2) Why doesn’t my paycheck match the tax I owe?
Paychecks reflect withholding, not final tax liability. Withholding can be higher or lower than your final bill depending on your W‑4, bonuses, multiple jobs, credits, and timing. This calculator estimates the progressive income tax, not withholding schedules.
3) Does this include Social Security and Medicare?
No. Those are payroll taxes (FICA) and are separate from federal income tax brackets.
4) Is this accurate for capital gains and dividends?
Not fully. Long‑term capital gains and qualified dividends often have different rate schedules. Use this as a baseline for ordinary income tax brackets.
5) Standard vs. itemized—how do I choose?
Take whichever is larger. Standard deduction is automatic and easy. Itemizing can win if you have enough deductible expenses. This calculator lets you test both quickly.
6) Which “tax year” should I pick?
Pick the year you earned the income. For example, money earned in 2025 is generally reported on a return filed in early 2026.
Sources note: 2024 bracket thresholds come from the IRS “Federal income tax rates and brackets” overview; 2025 thresholds match IRS inflation adjustment guidance (Revenue Procedure 2024‑40) as summarized by Fidelity.