The IRS categorizes taxpayers into seven brackets based on income and filing status. People who fall in different tax brackets pay different percentages in taxes. Meanwhile, your tax bracket can shift if your income changes over time.
Federal tax brackets matter because they can help you understand how much you owe the government and assist with tax planning. It’s also important to note that tax brackets can slightly shift from one year to the next due to inflation adjustments.
In this Western Shamrock article, we answer the question, “What is a tax bracket?” and explain federal income tax rates.
We’ll also clear up any confusion you may have about the differences between income tax, capital gains, marginal tax rates, and effective tax rates. You may encounter these different types of tax rates during the tax year while preparing your income taxes.
The U.S. Tax System Explained Simply
The U.S. operates under a progressive tax system, meaning the more money you earn, the higher the tax bracket you fall into, and the higher the tax rate you owe.
It is sometimes also referred to as a graduated tax system. The purpose of this structure is to promote fairness by having high-earning individuals contribute larger shares to public revenue. In this way, governments can reduce income inequality while funding services used by the public.
In addition to income, federal tax brackets depend on filing status, such as single, married filing jointly, married filing separately, and heads of household.
Here are some key terms to know to help you understand the U.S. tax system.
Taxable Income
A common misconception is that taxable income is only the wages you bring in. However, taxable income also includes things like retirement distributions and investment interest. Any tax deductions or adjustments are taken out of these figures before they become taxable income.
Marginal Tax Rate
The marginal tax rate is the rate at which the government taxes your last dollar of income. It doesn’t apply to your entire income but only to income within a certain bracket. When you move into higher tax brackets, only the portion of your income above a threshold is taxed at a higher rate.
Effective Tax Rate
The effective tax rate is the total tax you’ve paid, represented as a percentage of the total income taxed. It is the average percentage of the total income you pay in taxes. It applies only to your highest income bracket and reflects your overall tax burden across all levels of income.
Filing Status
Your filing status depends upon your relationship and living situation. Examples of filing status are single, married filing jointly, married filing separately, head of household, and qualified surviving spouse.
2024 Federal Income Tax Brackets (for Taxes Filed in 2025)
What were the income tax brackets for tax year 2024? And how do tax brackets work?
Here’s a table detailing the seven tax brackets and federal income tax rates relevant to income earned in 2024. These figures applied to taxes you had to file in 2025.
| Tax Rate | Single | Married Filing Jointly | Head of Household | Married Filing Separately |
| 10% | $0 to $11,600 | $0 to $23,200 | $0 to $16,550 | $0 to $11,600 |
| 12% | $11,601 to $47,150 | $23,201 to $94,300 | $16,551 to $63,100 | $11,601 to $47,150 |
| 22% | $47,151 to $100,525 | $94,301 to $201,050 | $63,101 to $100,500 | $47,151 to $100,525 |
| 24% | $100,526 to $191,950 | $201,051 to $383,900 | $100,501 to $191,950 | $100,526 to $191,950 |
| 32% | $191,951 to $243,725 | $383,901 to $487,450 | $191,951 to $243,700 | $191,951 to $243,725 |
| 35% | $243,726 to $609,350 | $487,451 to $731,200 | $243,701 to $609,350 | $243,726 to $365,600 |
| 37% | $609,351 or more | $731,201 or more | $609,351 or more | $365,601 or more |
It’s important to note that these figures are only accurate for the 2024 tax year. Tax brackets typically change each year to account for inflation.
| How to Find Your Tax Bracket Fast
· Determine your filing status · Calculate your taxable income · Check the IRS federal tax bracket table for the current year |
2025 Federal Income Tax Brackets (Preview)
What are the current tax brackets for 2025?
We have a preview of 2025 federal income tax brackets based on IRS announcements. The tax rates are expected to remain the same. However, the qualifying income for each tax bracket will shift slightly higher than in 2024.
It’s never too early to start planning ahead for your taxes. However, be prepared for possible changes before it’s time to file 2025 income taxes.
| Tax Rate | Single | Married Filing Jointly | Head of Household | Married Filing Separately |
| 10% | $0 to $11,925 | $0 to $23,850 | $0 to $17,000 | $0 to $11,925 |
| 12% | $11,926 to $48,475 | $23,851 to $96,950 | $17,001 to $64,850 | $11,926 to $48,475 |
| 22% | $48,476 to $103,350 | $96,951 to $206,700 | $64,851 to $103,350 | $48,476 to $103,350 |
| 24% | $103,351 to $197,300 | $206,701 to $394,600 | $103,351 to $197,300 | $103,351 to $197,300 |
| 32% | $197,301 to $250,525 | $394,601 to $501,050 | $197,301 to $250,500 | $197,301 to $250,525 |
| 35% | $250,526 to $626,350 | $501,051 to $751,600 | $250,501 to $626,350 | $250,526 to $375,800 |
| 37% | $626,351 or more | $751,601 or more | $626,351 or more | $375,801 or more |
Real-World Example: Calculating Your Tax Bill
What is federal income tax for my situation? And what is my tax bracket?
It can help to see a real-world example of federal tax brackets so you can compare it to your own financial situation. Let’s say Maria is the head of her household and has a taxable income of $80,000 per year.
In 2024, Maria was in the third income bracket with a 22% tax rate. If her taxable income remains the same in 2025, she will remain in that same tax bracket.
Here are additional examples that would apply to both 2024 and likely 2025:
- Jerry is a single filer with a taxable income of $10,000 per year. He is in the first tax bracket, with a 10% tax rate.
- Stephanie and her spouse are filing taxes jointly and have a taxable income of $400,000. They are in the fifth tax bracket with a tax rate of 32%.
Capital Gains and Dividend Tax Rates
In addition to these U.S. tax brackets, there are other types of tax rates that are worth learning about. For example, you may encounter capital gains tax rates and dividend tax rates on investment statements. These statements show whether you’ve received dividends and capital gains or losses.
Short-term capital gains are taxed as ordinary income. These are assets that you’ve held for a year or less. The normal federal income tax rates referenced above apply to short-term capital gains.
However, based on income, long-term capital gains are taxed at 0%, 15%, or 20%. These are assets that you sold for profit and held for over a year. The table below shows the 2024-2025 capital gains tax brackets for long-term gains.
| Tax Rate | Single | Married Filing Jointly | Head of Household | Married Filing Separately |
| 0% | $0 | $0 | $0 | $0 |
| 15% | $47,025 -$518,900 | $94,050 – $583,750 | $63,000 – $551,350 | $47,025 – $291,850 |
| 20% | Greater than $518,901 | Greater than $583,751 | Greater than $551,350 | Greater than $291,850 |
| Tax-saving tip: The holding period matters for gains and dividends. Holding your investments longer than a year (or longer than the dividend holding window) can shift you into a lower tax bracket. |
Other Federal Tax Rates to Know
In addition to these tax bracket details, there are other federal tax rates you should know about. Here are some examples.
FICA Taxes (Social Security + Medicare)
Federal Insurance Contributions Act (FICA) tax rates apply to Social Security and Medicare contributions that are deducted from a paycheck.
Currently, the Social Security tax rate is 6.2%, but both employees and employers must pay this percentage, so the total rate is 12.4%.
The Medicare tax rate is currently 1.45% for both employers and employees, for a total of 2.9%.
Self-Employment Tax
If you work for yourself, there is no external employer to take Social Security and Medicare tax out of your paychecks. Therefore, you must pay self-employment tax, which is separate from income tax.
The current self-employment tax rate is 15.3%, which includes 12.4% for Social Security and 2.9% for Medicare.
Bonus Tax Withholding Rate
If you receive a bonus or supplemental wages from your job, the bonus tax withholding rate applies to this money. Examples of money that fall under this category include prizes, awards, some commissions, back pay, reported tips, and overtime pay.
A flat 22% is the bonus tax withholding rate for amounts under $1 million. For amounts over $1 million, the bonus tax rate is 37% for each dollar over $1 million. People who experience a bonus tax withholding rate higher than their income tax brackets may be eligible for a tax refund.
How to Lower Your Taxable Income (and Stay in a Lower Bracket)
Federal income tax brackets can feel limiting because they place you in categories based on criteria that might not encompass your entire financial picture. Fortunately, there are ways to lower your taxable income and remain in a lower tax bracket to pay less taxes to the IRS.
For example, it is beneficial to maximize your deductions to lower your tax bill. If possible, claim more deductions or delay receiving certain parts of your income until the following year. You can open tax-advantaged accounts to pay less in taxes than you otherwise would, such as a 401(k), IRA, or HSA.
Tax credits are also available to help you lower your tax burden, including the Earned Income Tax Credit for low- to mid-income working individuals and couples, especially those who have children. There’s also the Child Tax Credit that you can take for qualifying children and the American Opportunity Credit for qualified education expenses you paid for an eligible student for their first four years of higher education.
Tax Bracket Myths Debunked
What are the federal tax brackets myths, and what makes them false?
One myth is that being in a higher bracket means all of your income is taxed at that rate. In fact, your income is taxed in chunks, with each portion taxed at the relevant rate. The highest rate is not applied to your whole income.
Another myth is that moving into a new tax bracket is bad. However, earning more income is generally a good thing. Moving into a new tax bracket doesn’t mean all your income will be taxed at that higher rate. Only the income above that threshold is taxed at the whole rate.
A third myth is that effective and marginal tax rates don’t matter. Both rates matter, in fact. Marginal tax rates impact bonuses, raises, retirement disbursements, and side income. Meanwhile, effective tax rates matter for budgeting and understanding how much you earn goes toward taxes.
Frequently Asked Questions
If you have other questions such as, “What are the tax brackets used for?” and “Which tax bracket is best to be in?” you’re not alone.
Here are some answers to common questions our tax preparers receive from customers.
What Does Tax Bracket Mean?
Federal tax brackets define how much in tax you have to pay based on specific chunks of your income – not the entire income. It’s a range of income taxed at a specified rate in the U.S. income tax system.
What Is the Meaning of Income Bracket?
Your income bracket places you into a group based on your earnings. It’s an income range used for tax calculations but also other purposes, such as determining eligibility for benefits, targeted marketing, and demographic studies.
What Is the Highest Tax Bracket?
Many people wonder what are the different tax brackets and which one is the highest. The highest one is the 37% tax bracket.
For people filing as a single individual in 2024, this means your taxable income is over $609,350. If you’re married filing jointly, it’s over $731,200. If you’re the head of household, it’s over $609,350. And if you’re married filing separately, it’s over $365,600.
What Income Bracket Do You Have to Pay Taxes?
If your taxable income is more than the standard deduction, you must generally pay federal income taxes. For reference, standard deduction amounts for 2024 were $14,600 for single, $29,200 for married filing jointly, and $21,900 for head of household.
Is It Better to Be in a Higher Tax Bracket?
Being in a higher tax bracket is generally a good thing because it means you earn more money. Only the top portion of your taxable income is taxed at a higher rate than your other income. When you have more incoming money, you have more financial options, such as retirement savings and investing.
What Tax Bracket Is Middle Class?
A middle-class household is generally considered to have an income between $50,000 and $150,000. Depending on your filing status, this could mean you are in the 12%, 22%, or 24% tax bracket.
What Is the Lowest Tax Bracket?
Under the U.S. federal income tax system, the lowest tax bracket is the 10% threshold. Being in this bracket in 2024 means your taxable income was under $11,600 as single, under $23,200 as married filing jointly, and under $16,550 as filing head of household.
What Class Pays the Most Taxes?
The upper, wealthiest class pays the most in taxes in the U.S. However, the middle class often pays the greatest portion of their income in taxes.
Get Help with Your Taxes
We hope that you now understand the answer to “What is a tax bracket?” and why tax brackets matter in the U.S. Tax law can be confusing and overwhelming, which is why Western Shamrock is here for you whenever you need help preparing your taxes.
Our tax services guarantee that your filings are correct and that you receive the largest possible refund.
Visit a branch near you to learn more about your tax obligations or to schedule us to prepare and file your income taxes. When you schedule your appointment in advance, we can do much of the prep work before your appointment to save you time during tax season.
