Chapter 1: Income Tax: It's Progressive!

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If you're in the 22% tax bracket it does not mean all your income is taxed at 22%

https://www.nerdwallet.com/blog/taxes/federal-income-tax-brackets

Your tax bracket depends on your taxable income and filing status (such as single, married filing jointly etc). Your filing status is based on your situation on the last day of the tax year.

Marginal Tax Rate

This is just the tax rate that you would pay on one additional dollar of income. For example if you're single and your taxable income is $60k your tax rate is 22%. If your employer offers a $10k raise then cause your marginal tax rate is 22% you'll only keep 78% ($7.8k) of the raise.

Effective Tax Rate

This is your total income tax paid divided by taxable income, which for progressive taxes is different from your tax bracket

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  • 10 months ago by vince