How do federal income tax brackets work?

Federal income tax brackets are ranges of taxable income, and each range is taxed at its own rate. The U.S. uses seven rates, from 10% to 37%, and the Internal Revenue Service (IRS) taxes each dollar only at the rate of the bracket that dollar falls in. When income crosses into a higher bracket, the higher rate applies to the dollars above that threshold, not to the income below it.

This FAQ explains how the brackets are built, how to figure your marginal and effective tax rates and where bracket math alone falls short for higher earners.

What are the federal income tax brackets for 2026?

The IRS set the 2026 thresholds in Revenue Procedure 2025-32, announced Oct. 9, 2025. They apply to income earned in 2026 and reported on returns filed in 2027. Each rate covers these ranges of taxable income.

Heads of household and married couples filing separately have their own thresholds, listed in the revenue procedure and in the Tax Foundation's 2026 bracket tables.

The 2025 reconciliation law commonly known as the One Big Beautiful Bill Act (OBBBA) permanently extended the seven individual rates enacted in the Tax Cuts and Jobs Act of 2017, according to the IRS' 2026 employer tax guide. Only the dollar thresholds move from year to year.

The federal brackets apply the same way in every state. State income taxes are separate and vary widely.

For 2026, eight states — Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas and Wyoming — levy no individual income tax, and Washington taxes only capital gains.

Fifteen states use a single flat rate and 26 states plus the District of Columbia use graduated brackets, according to the Tax Foundation's 2026 state rate tables.

Do the brackets apply to my salary or to something else?

To taxable income, which is usually well below salary. Taxable income is what remains after adjustments and deductions come out of gross income.

The largest deduction for most filers is the standard deduction, which the IRS set at $16,100 for single filers and $32,200 for married couples filing jointly for 2026. Taxpayers who itemize deductions instead can't also claim the standard deduction.

Elective deferrals to a traditional 401(k) plan generally aren't included in box 1 wages on Form W-2 or reported as wages on Form 1040, although they still count as wages for Social Security and Medicare taxes.

Most income is taxable unless the law specifically exempts it. Moonlighting pay as an independent contractor, partnership income, interest and capital gains all land on the same return as W-2 wages.

If a raise pushes me into a higher bracket, will I take home less?

No. A raise that crosses a bracket threshold is taxed at the higher rate only on the dollars above the line, the IRS explains. Everything below the threshold is taxed exactly as it was before.

Take a single physician with a $300,000 salary, no other income and only the 2026 standard deduction. Taxable income is $283,900, and federal income tax builds up bracket by bracket.

Total federal income tax comes to about $68,134. A $10,000 raise lands entirely in the 35% bracket, so it adds $3,500 in federal income tax and leaves $6,500 of the raise before payroll taxes and any state income tax. The example leaves out credits, other deductions and other income, any of which would change the result.

What is the difference between a marginal tax rate and an effective tax rate?

The marginal rate is the tax on your next dollar of income. The effective rate, which economists also call the average rate, is total tax divided by total income. The Urban-Brookings Tax Policy Center describes the average rate as a measure of tax burden and the marginal rate as a measure of how taxes affect the decision to earn, save or spend one more dollar.

In the example above, the physician's marginal rate is 35%. The effective rate is 24% of taxable income and about 22.7% of the $300,000 salary.

The marginal rate shows how much federal income tax changes when taxable income moves up or down. At a 35% marginal rate, $1,000 of additional income adds $350 in tax, and a deduction that cuts taxable income by $1,000 lowers tax by the same $350. The effective rate shows the overall share of income going to federal income tax.

When doesn't my tax bracket tell the whole story?

When other taxes, limits or phaseouts apply on top of the bracket rates. Tax Policy Center researchers Rosanne Altshuler and Jacob Goldin have written that the tax on the last dollar earned, which economists call the effective marginal tax rate, can sit well above or below the statutory bracket rate. Several provisions stack on top of the brackets for higher earners:

• Additional Medicare Tax: A 0.9% tax applies to wages and self-employment income above $200,000 for single filers, $250,000 for married couples filing jointly and $125,000 for married couples filing separately.
• Net investment income tax: A 3.8% tax applies to the smaller of net investment income or the amount by which modified adjusted gross income exceeds $200,000 for single filers or $250,000 for joint filers. It does not apply to wages.
• Qualified business income deduction: For some owners of pass-through businesses, the deduction begins to phase down above $201,775 of taxable income for single filers in 2026, according to the Tax Foundation.
• Itemized deductions: The OBBBA limits their tax benefit for taxpayers in the 37% bracket.
• Alternative minimum tax: The exemption begins phasing out at $500,000 for single filers and $1 million for joint filers in 2026, according to the IRS.

Are investment gains taxed using the same brackets?

Short-term gains are. Long-term gains are not. Under IRS rules, an asset held more than one year produces a long-term gain, taxed at 0%, 15% or 20% depending on taxable income. An asset held one year or less produces a short-term gain, taxed as ordinary income at the regular bracket rates.

For 2026, the 15% rate on long-term gains begins at taxable income above $49,450 for single filers and $98,900 for joint filers, and the 20% rate begins above $545,500 and $613,700, respectively, according to the Tax Foundation's summary of the IRS revenue procedure. Higher earners may also owe the 3.8% net investment income tax on those gains.

How do tax brackets work for married physicians?

Through the 32% bracket, every joint-filer threshold in the IRS' 2026 figures is exactly twice the single-filer amount.

The 37% rate is the exception. It starts at $768,700 of taxable income on a joint return, compared with $1,281,200 if the single threshold of $640,600 were doubled. Two spouses who would each stay in the 35% bracket as single filers can have part of their combined income taxed at 37% on a joint return.

The Additional Medicare Tax and net investment income tax follow the same pattern. Their joint-filer threshold is $250,000, compared with $200,000 for a single filer, rather than double the single amount.

Why doesn't my paycheck withholding match my tax bracket?

Withholding is an estimate made each pay period from your Form W-4 and IRS withholding tables, not a calculation of your final bill.

When an employer pays a bonus separately from regular wages, it can withhold federal income tax at a flat 22%, or 37% on supplemental wages above $1 million in a year, under IRS Publication 15. For a physician whose marginal rate is 32% or 35%, that bonus is taxed at the higher rate, and the 22% withheld won't cover all of it.

Employers must also withhold the Additional Medicare Tax once an employee's wages pass $200,000 in a calendar year, regardless of filing status. That can leave a married couple over-withheld or under-withheld depending on how their combined wages compare with the $250,000 joint threshold.

Income with no withholding at all, such as independent contractor pay or investment income, may call for higher withholding or estimated tax payments during the year to avoid penalties. The IRS Tax Withholding Estimator can show whether your current withholding is on track.

Do tax brackets change every year?

The dollar thresholds do. The rates change only when Congress changes them. Congress began indexing the brackets to inflation with the Economic Recovery Tax Act of 1981, which aimed to stop "bracket creep," or inflation pushing taxpayers into higher brackets without any real gain in income, according to a Tax Policy Center brief.

Since the 2017 tax law, the IRS has used the chained consumer price index to make those adjustments, according to the Tax Foundation. That index usually grows more slowly than the traditional consumer price index, so thresholds rise a bit less each year than they would have under the old measure. The OBBBA added an extra adjustment to the 10% and 12% brackets, which rose about 4% for 2026 while the higher brackets rose about 2.3%, the Tax Foundation reported.

The IRS announces the next year's thresholds each fall in a revenue procedure. Its federal income tax rates and brackets page links to the current figures.

Where can I check my own numbers?

Start with last year's Form 1040, which shows both taxable income and total tax. Dividing total tax by taxable income gives an effective rate, and finding where your taxable income falls in the bracket table gives your marginal rate.

From there, the IRS' Publication 17 walks through the individual return line by line, and the Tax Withholding Estimator can project the current year.