Marginal taxation systems like the U.S. federal income tax system increase the percentage of income owed to taxes as a taxpayer’s income increases. There are seven income brackets. Your marginal tax rate will also be affected by your filing status, which could be single, married filing jointly or head of household. Only the amount of income within a particular bracket is subject to the corresponding marginal tax rate. To calculate your marginal tax rate, apply the percentage of tax charged to the amount of income in each bracket according to your filing status and add up the totals.
A financial advisor can help you determine your tax situation.
Marginal Tax Rate Basics
The federal income tax system in the United States uses a marginal tax approach. This means that taxes get higher as income increases. The method is progressive, so that people who have more income pay more taxes. Taxpayers may find it somewhat complicated to figure out exactly how much they owe, because different slices of income are subject to different tax rates.
The tax system employs seven income brackets, each with a corresponding marginal income tax rate. The IRS changes the income range included in each bracket annually to account for inflation. The tax brackets can be changed by Congress. They are 10%, 12%, 22%, 24%, 32%, 35% and 37%, with each rate being applied to income in the associated bracket.
Filing status, which is determined by the sort of household in which a taxpayer lives, also can affect the tax owed. The types of filing used for the tax brackets are: single filers, married filing jointly and head of household.
For the 2022 tax year, the tax brackets and tax rates applied to each filing status are:
Federal Income Tax Bracket for 2022 (filing deadline: April 17, 2023)
| Single | Married Filing Jointly | Married Filing Separately | Head of Household | |
| 10% | $0 – $10,275 | $0 – $20,550 | $0 – $10,275 | $0 – $14,650 |
| 12% | $10,276 – $41,775 | $20,551 – $83,550 | $10,276 – $41,775 | $14,651 – $55,900 |
| 22% | $41,776 – $89,075 | $83,551 – $178,150 | $41,776 – $89,075 | $55,901 – $89,050 |
| 24% | $89,076 – $170,050 | $178,151 – $340,100 | $89,076 – $170,050 | $89,051 – $170,050 |
| 32% | $170,051 – $215,950 | $340,101 – $431,900 | $170,051 – $215,950 | $170,051 – $215,950 |
| 35% | $215,951 – $539,900 | $431,901 – $647,850 | $215,951 – $323,925 | $215,951 – $539,900 |
| 37% | $539,901+ | $647,851+ | $323,926+ | $539,901+ |
Calculating Marginal Tax
In order to figure your marginal tax rate, it’s necessary to break up your income according to the tax brackets, then apply the tax rate to the portion of income in each bracket. For example, if you are a single filer with $60,000 of taxable income, you would apply the lowest 10% percent rate to the first $10,275 of your taxable income. The next highest 12% rate would apply to the next $31,500 of taxable income. The next highest rate of 22% would apply to the remaining $28,500 of income.
The calculation would look like this:
Calculating Marginal Tax Rate
| Income | Rate | Tax |
| $10,275 | 10% | $1,027.50 |
| $31,500 | 12% | $3,780 |
| $28,500 | 22% | $6,270 |
Add those three tax numbers together and you get a total tax payment of $11,077.50.
Note that a typical taxpayer would owe additional taxes for FICA, which includes Social Security and Medicare taxes. FICA taxes are not progressive, so that the same rate applies to all income. Social Security taxes are not levied on income over $147,000, however, while high earners pay an additional Medicare tax.
Effective Tax Rate
The marginal tax rate is different from and usually less than the effective tax rate. The effective tax rate is the rate that applies to a taxpayer’s entire income. To calculate it, divide the total amount owed in taxes by the total amount of taxable income. For the example above, this calls for dividing the total tax of $11,077.50 by the total taxable income of $60,000. The resulting figure, expressed as a percentage, is 18.46%.
Bottom Line
To calculate marginal tax rate, apply the appropriate tax rate to the amount of taxable income you have in each of the seven income tax brackets, then total the results. Only the amount of income included in each bracket is subject to the tax rate connected to that bracket. You’ll also need to know your filing status, which could be single, married filing jointly or head of household. Your top marginal tax rate is different from and usually higher than your effective tax rate, which is the average rate applied to your total taxable income.
Tax Tips
- To manage your own tax burden, talk to a financial advisor. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- To get a sense of what your tax burden could be, use SmartAsset’s free tax calculator. To use this free online tool, enter your household income, location and filing status. The calculator will tell you your total tax liability for the current tax year. It’s updated annually after the IRS releases the latest set of tax brackets. And it includes FICA as well as state and local taxes.
Photo credit: ©iStock.com/pcess609, ©iStock.com/damircudic, ©iStock.com/ilkercelik