Marginal vs. Effective Tax Rate: What You Actually Pay
“I don’t want a raise, it’ll push me into a higher bracket.”
People really say this, and it’s never true for a regular paycheck. The confusion comes from mixing up two different numbers: your marginal tax rate and your effective tax rate.
Marginal rate: the rate on your next dollar
The U.S. taxes income in layers. For a single filer in 2026, after the $16,100 standard deduction:
| Taxable income | Rate |
|---|---|
| First $12,400 | 10% |
| $12,400 to $50,400 | 12% |
| $50,400 to $105,700 | 22% |
| $105,700 to $201,775 | 24% |
| $201,775 to $256,225 | 32% |
| $256,225 to $640,600 | 35% |
| Over $640,600 | 37% |
Your marginal rate is the rate on the top layer you reach. It’s what you’d pay on one more dollar of income.
Effective rate: what you pay overall
Your effective rate is your total tax divided by your total income. It’s always lower than your marginal rate, often by a lot.
Take someone earning $85,000 a year.
- Subtract the standard deduction: $85,000 minus $16,100 leaves $68,900 of taxable income.
- The first $12,400 is taxed at 10%: $1,240
- The next $38,000 (up to $50,400) is taxed at 12%: $4,560
- The last $18,500 is taxed at 22%: $4,070
Total federal income tax: $9,870.
Their marginal rate is 22%. But $9,870 divided by $85,000 is 11.6%. That’s their effective federal income tax rate, about half the bracket they’re “in.”
Adding FICA and state tax
Federal income tax isn’t the whole story. Social Security and Medicare add a flat 7.65% on top, and state tax adds more in most places.
For our $85,000 earner in Texas, which has no income tax:
- Federal income tax: $9,870
- Social Security and Medicare: $6,503
- Total: $16,373, or 19.3% of pay
In a state like Oregon or New York, the total would be several points higher.
Why a higher bracket doesn’t hurt you
Say this person gets a $5,000 raise to $90,000. That extra $5,000 is taxed at their marginal rates: 22% federal plus 7.65% FICA. Nothing about the first $85,000 changes.
Their take-home pay goes up by $3,518 a year. You can check any raise with our raise calculator. Not $5,000, but not less than zero either. Higher brackets only apply to the dollars inside them.
There are a few cases where earning a bit more can cost you something, like the child tax credit shrinking above $200,000 ($400,000 married), income limits on the earned income tax credit, ACA health insurance subsidies, or some state programs. Those are real, but they’re about credits and benefits phasing out, not tax brackets.
Which number should you use?
- Use your marginal rate to judge decisions at the edge: a raise, a side gig, a bonus, or how much a 401(k) contribution saves you. Every $1,000 you put in a traditional 401(k) at a 22% marginal rate saves $220 in federal tax.
- Use your effective rate to understand your overall tax burden, or to compare states and salaries.
Our paycheck calculator shows both: your total tax rate at the top and your marginal federal and state rates just below the breakdown.