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By timestaff
May 26, 2014
UWE—age fotostock

Your tax bracket – a.k.a. your marginal tax rate – is the highest percentage of your income that Uncle Sam will expect you to cough up in federal taxes.

The tax brackets range from 10% to 39.6%—and the more you earn the higher your bracket. You can find your 2015 bracket here. But be aware that the rate is not applied flat across all your income. Portions of your income fall into different brackets, which means your actual tax rate is likely to be much lower than your bracket.

Let’s say you’re single and your household income is $89,000 in 2014. That puts you in the 25% tax bracket, but the first $9,075 of that is taxed at 10%, and everything between that and $36,900 is taxed at 15%. So only the last $43,025 of your income is taxed at 25%, which is why the tax bracket is sometimes defined as the rate you’ll pay on the last dollar you earn.

The actual percentage of your total income you’ll pay in taxes—in IRS-speak, your effective tax rate—will likely be much lower than your tax bracket, in part because the tax is calculated in the proportional way described above. Also, any deductions and credits that you are eligible to take will reduce your effective tax rate even more.

Read next: What is FICA?

Advertiser Disclosure

The purpose of this disclosure is to explain how we make money without charging you for our content.

Our mission is to help people at any stage of life make smart financial decisions through research, reporting, reviews, recommendations, and tools.

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Our content is free because our partners pay us a referral fee if you click on links or call any of the phone numbers on our site. If you choose to interact with the content on our site, we will likely receive compensation. If you don't, we will not be compensated. Ultimately the choice is yours.

Opinions are our own and our editors and staff writers are instructed to maintain editorial integrity, but compensation along with in-depth research will determine where, how, and in what order they appear on the page.

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