What Tax Bracket Am I Actually In?

"I don't want a raise because it'll put me in a higher tax bracket." If you've ever said this — or even thought it — you're not alone. It's one of the most common money myths out there. And it's completely wrong.

Understanding how tax brackets actually work isn't just a fun fact for trivia night. It affects how you think about earning more, contributing to retirement accounts, and making decisions that could save (or cost) you thousands of dollars a year.

How Tax Brackets Actually Work

The U.S. uses a marginal tax system. That means you don't pay one flat rate on all your income. Instead, your income is taxed in layers — each layer (bracket) has its own rate, and only the income within that bracket gets taxed at that rate.

2026 federal tax brackets for single filers:

10% on income up to $11,925
12% on income from $11,926 to $48,475
22% on income from $48,476 to $103,350
24% on income from $103,351 to $197,300
32% on income from $197,301 to $250,525
35% on income from $250,526 to $626,350
37% on income over $626,350

Here's what this means in practice: If you earn $60,000, you don't pay 22% on the whole $60,000. You pay 10% on the first $11,925, 12% on the next chunk up to $48,475, and 22% only on the remaining amount above $48,475.

Your actual tax on $60,000 would be roughly $8,400 — an effective rate of about 14%, not 22%. The 22% is your marginal rate (the rate on your last dollar earned), but your average rate across all your income is much lower.

Why This Matters for Your Money Decisions

When people misunderstand marginal tax rates, they make bad decisions:

"I shouldn't take that raise." A raise never makes you poorer. If you earn $48,000 and get a $5,000 raise to $53,000, only the $5,000 above the 12% bracket gets taxed at 22%. You still take home more money. Always.

"I should earn less to stay in a lower bracket." Earning less to avoid taxes is like refusing to score because the other team might play harder. The math never works in your favor.

"My side hustle isn't worth it because of taxes." Extra income is extra income. Yes, you'll owe taxes on it. But you'll always keep more than you pay.

Taxable Income vs. Gross Income

Here's another key distinction: your tax bracket is based on your taxable income, not your salary.

Taxable income is what's left after deductions. For 2026, the standard deduction for a single filer is $15,000. So if your salary is $60,000, your taxable income is closer to $45,000 — which actually keeps you in the 12% bracket for almost all of it.

This is also why retirement contributions matter for taxes. Contributing to a traditional 401(k) or traditional IRA reduces your taxable income. If you earn $60,000 and contribute $5,000 to a traditional 401(k), your taxable income drops to $55,000 — and your tax bill drops with it.

If you're weighing whether to use a Roth or Traditional account for retirement savings, this post breaks down the key differences.

Your Marginal Rate vs. Your Effective Rate

These are two different numbers, and confusing them leads to overestimating your tax burden:

Marginal rate: The tax rate on your next dollar of income. This is your "bracket."
Effective rate: The average rate you actually pay across all your income. Always lower than your marginal rate.

For most people earning between $40,000 and $100,000, the effective federal tax rate is somewhere between 10% and 18% — significantly lower than whatever bracket they think they're in.

Knowing your effective rate helps you make better decisions about things like freelance income, bonuses, and retirement contributions because you're working with the real numbers instead of the inflated ones.

State Taxes Add a Layer

Federal brackets are only part of the picture. Most states have their own income tax — some are flat rates, some are progressive like the federal system, and a handful (like Texas, Florida, and Nevada) have no state income tax at all.

Your total marginal rate is your federal marginal rate plus your state rate. If you're in the 22% federal bracket and live in a state with a 5% income tax, your combined marginal rate on additional income is roughly 27%.

This matters most when you're evaluating job offers in different states, deciding how much to contribute to pre-tax retirement accounts, or calculating the real impact of a side income stream.

The Bottom Line

Tax brackets are layers, not cliffs. A raise will never cost you more than it earns you. Your effective tax rate is lower than your marginal rate. And understanding this distinction is one of the most valuable pieces of financial literacy you can have — it keeps you from leaving money on the table out of fear of a tax system that's actually more forgiving than most people think.

Want to keep more of what you earn? Check out our free guides for frameworks on maximizing every dollar — including the ones that go to taxes.