taxes

tax bracket

A range of incomes taxed at a particular rate under a progressive tax system.

Example

“Getting a raise pushed him into a higher tax bracket, but only the income above the threshold was taxed at the higher rate.”

Memory Tip

A BRACKET holds things in a range. Your tax bracket is the range your income falls into for tax purposes.

Why It Matters

Understanding tax brackets helps you predict how much you will owe in taxes and plan your income accordingly. It also allows you to make informed decisions about whether taking additional income or pursuing higher-paying opportunities will significantly impact your overall tax burden.

Common Misconception

Many people believe that moving into a higher tax bracket means all of their income gets taxed at the higher rate. In reality, only the income that falls within that specific bracket is taxed at that rate, so earning more money does not cause your entire income to be taxed at the new higher percentage.

In Practice

In 2024, a single filer in the United States with income between approximately 47,150 and 100,525 dollars falls into the 22 percent federal tax bracket. However, the income below 47,150 is taxed at lower rates of 10 and 12 percent, so only the portion of income above 47,150 gets taxed at the 22 percent rate.

Etymology

Tax (a compulsory payment to government) + bracket (a category or range) — the category of your tax rate.

Common Misspellings

tax bracettax brackitttax brackedtax brackket

Related Terms

marginal tax rate progressive tax

More in taxes

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