Marginal tax rate: meaning, and what a raise does to your tax

What a marginal tax rate means

Cambridge Dictionary defines a marginal rate as the rate of tax paid on the last part of a person's income in a period. The word marginal means at the edge. It is the rate on the edge of your income.

The IRS explains the idea this way: you pay tax as a percentage of your income in layers called tax brackets. Each rate applies only to the income in its layer.

The 2026 brackets

For a single filer in 2026, the brackets (IRS Rev. Proc. 2025-32) are 10% up to $12,400 of taxable income, 12% to $50,400, 22% to $105,700 and 24% to $201,775. Taxable income is what is left after the standard deduction, which is $16,100 for a single filer and $32,200 for a married couple filing jointly.

If your taxable income is $48,900, your marginal rate is 12%. A raise puts the next dollars at 12%, until it crosses $50,400 and the 22% rate takes over.

A raise never costs you money

There is a myth that a raise can push you into a bracket where you take home less. It cannot: only the dollars above the line are taxed at the higher rate, and the dollars below stay where they were.

Marginal rates are the right tool for questions about the next dollar, such as how much a 401(k) saves or how much of an overtime shift you keep. For a couple, your combined taxable income sets the brackets if you file jointly, and the bracket limits for married filing jointly are wider.

A worked example: a $3,000 raise, single, 2026

• Taxable income before the raise: $65,000 - $16,100 = $48,900. Marginal rate: 12%.
• Room left in the 12% bracket: $50,400 - $48,900 = $1,500.
• The first $1,500 of the raise is taxed at 12%: $180.
• The other $1,500 is taxed at 22%: $330.
• Income tax on the raise: $180 + $330 = $510, which is 17% of $3,000.
• Social Security and Medicare take 7.65% of $3,000 = $229.50.
• You keep $3,000 - $510 - $229.50 = $2,260.50 before state tax.