If you’ve ever heard someone say, “I don’t want a raise because it’ll put me in a higher tax bracket,” you’re not alone.
This misunderstanding keeps people anxious about money, confused about their paychecks, and sometimes even causes people to “no” to more income. And the frustrating part? It’s not because taxes are impossible to understand; it’s because they’re rarely explained.
We’re going to fix that. Let’s break down what a tax bracket actually is, how it works, and why moving into a higher bracket is not a bad thing.
What is a Tax Bracket?
At its core, a tax bracket is simply a rule. It’s a rule that says: “For this specific range of income, this is the percentage of tax that applies.”
That’s it.
A tax bracket is not a label for you as a person, and it’s not a single rate applied to everything you earn. Instead, it applies only to a portion of your income, a slice, not the whole pie.
How the System Works Overall
The U.S. uses what’s called a progressive tax system. That means your income is taxed in layers, starting with the lowest rates and moving upward as income increases.
Think of your income as being stacked from the bottom up. The first chunk of money you earn is taxed at the lowest rate. Once that chunk is “filled,” the next dollars move into the next layer and are taxed at a slightly higher rate. This continues step by step.
You don’t jump into one tax rate and suddenly re-tax all your income. You move through the brackets gradually.
2025 Tax Brackets
Before we walk through an example, it helps to see what people mean when they say “10% bracket” or “22% bracket.” These percentages don’t float randomly, they apply to specific dollar ranges.
Here’s a simplified look at the 2025 federal tax brackets for a single filer (after deductions, meaning this is taxable income):
| 2025 Tax Rate | Single Filers | Married Filing Jointly | Head of Household |
|---|---|---|---|
| 10% | $0 to $11,925 | $0 to $23,850 | $0 to $17,000 |
| 12% | $11,925 to $48,475 | $23,850 to $96,950 | $17,000 to $64,850 |
| 22% | $48,475 to $103,350 | $96,950 to $206,700 | $64,850 to $103,350 |
| 24% | $103,350 to $197,300 | $206,700 to $394,600 | $103,350 to $197,300 |
| 32% | $197,300 to $250,525 | $394,600 to $501,050 | $197,300 to $250,500 |
| 35% | $250,525 to $626,350 | $501,050 to $751,600 | $250,500 to $626,350 |
| 37% | $626,350 or more | $751,600 or more | $626,350 or more |
What’s important to understand is that these ranges stack. You don’t choose one, you move through them.
An Example:
Let’s say your taxable income for the year is $50,000.
Some of that income falls into the lowest tax bracket and is taxed at the lowest rate. The next portion falls into the next bracket and is taxed at a slightly higher rate. Only the top portion of your income (the last dollars you earned) reaches the higher bracket.
So even if your highest tax bracket is 22%, most of your income is still being taxed at lower rates like 10% and 12%. Only the dollars that spill into that top layer are taxed at 22%.
This is why the phrase “I’m in the 22% tax bracket” is misleading. It doesn’t mean 22% applies to all your income, it just means your last dollars earned fall into that range.
The Myth
Here’s the belief that trips people up the most: “If I move into a higher tax bracket, all my money will be taxed at that higher rate.”
That isn’t how the system works.
Moving into a higher bracket only affects the income above that threshold. Everything below it is still taxed exactly the same way it was before. Because of this structure, earning more money will never reduce your take-home pay just because of tax brackets alone.
Marginal vs. Effective Tax Rate
If you’ve ever looked at a tax calculator or your tax return and seen two different rates: marginal rate and effective rate. You might have wondered why they’re different… or which one actually matters.
The short answer? They both matter, but they answer two very different questions.
What is a marginal tax rate?
Your marginal tax rate is the tax rate applied to your last dollar of income.
In other words, it answers this question: “If I earn one more dollar, how much of that dollar goes to federal income tax?”
Your marginal rate comes from the highest tax bracket you reach. So when someone says “I’m in the 22% tax bracket,” what they really mean is “My highest slice of income is taxed at 22%.” It does not mean all of their income is taxed at 22%.
What is an effective tax rate?
Your effective tax rate is your average tax rate. It answers a different question “Out of all my income, what percentage did I actually pay in federal income tax?”
It’s calculated like this: Total federal income tax ÷ taxable income
Because your income is taxed across multiple brackets, your effective rate is almost always lower than your marginal rate.
The One Thing to Remember
If you remember nothing else, remember this:
A tax bracket is simply a rule for how a specific slice of your income is taxed — not a judgment on you, your job, or your financial worth.
Taxes don’t have to feel overwhelming. Often, they just need to be explained the right way. And now, they have been 🙂
