Tax Bracket

A tax bracket is a defined income range within the U.S. federal graduated income tax structure. The United States uses a marginal (or progressive) rate system in which different portions of your taxable income are taxed at different rates — not all income at a single flat rate. For 2025, the seven federal ordinary income tax brackets are 10%, 12%, 22%, 24%, 32%, 35%, and 37%.

It is important to understand the most common misconception about tax brackets: moving into a higher bracket does not mean all of your income is taxed at that higher rate. Only the income that falls within a specific bracket is taxed at that bracket's rate. For a single filer in 2025, the first $11,925 of taxable income is taxed at 10%, income from $11,926 to $48,475 at 12%, income from $48,476 to $103,350 at 22%, and so on. A person who earns $50,000 in taxable income does not have all $50,000 taxed at 22% — the 22% rate applies only to the slice of income between $48,476 and $50,000.

For married couples filing jointly in 2025, the bracket thresholds are roughly double the single filer thresholds in the lower and middle ranges: 10% up to $23,850, 12% from $23,851 to $96,950, 22% from $96,951 to $206,700, 24% from $206,701 to $394,600, 32% from $394,601 to $501,050, 35% from $501,051 to $751,600, and 37% above $751,600.

Brackets are adjusted annually for inflation by the IRS using the Chained Consumer Price Index (C-CPI-U). This annual adjustment prevents 'bracket creep,' where inflation pushes taxpayers into higher brackets even though their real purchasing power has not increased.

For investors, knowing your current tax bracket guides decisions about Roth versus traditional retirement contributions, the timing of income recognition, tax-loss harvesting strategies, and whether it is advantageous to convert traditional IRA funds to a Roth IRA. Understanding where you sit within a bracket — and how much room remains before crossing into the next bracket — allows for precise tax planning.