Were you aware that tax rates can vary depending as much on how you earn your money as how much money you earn? Because of this, not every dollar you earn is taxed at the same rate.
The United States, through the IRS, uses a progressive tax system to calculate and collect tax revenue. Under this system, the IRS tries to collect more taxes from those who have higher incomes during the year. As a result, a person who earns $1 Million during the year pays more in total taxes than a person who earns significantly less, say, $60,000 per year. High earners are also placed in a higher tax bracket, which results in a larger portion of their income being taxed than someone who earns far less.
What is an income tax bracket?
One way our tax system calculates and collects taxes is through the use of tax brackets. A tax bracket is simply a preselected range of incomes that are taxed at a set rate based on your taxable income.
Currently, there are seven tax brackets in use by the IRS, with the lowest income bracket being subject to a 10% marginal tax rate and the highest income bracket being subject to a 37% marginal tax rate. Your marginal tax rate will be dependent upon which income bracket your taxable income places you.
How do I determine what income tax bracket I’m in?
If you were a single filer with $60,000 in taxable income (income remaining after deductions), your taxes would be calculated as follows:
● The first $11,925 is taxed at 10%
● Income from $11,926 to $48,475 is taxed at 12%
● The remaining amount is taxed at 22%
Even though your income in this scenario places you in the 22 percent tax bracket, your effective tax rate, which is what you actually pay to the IRS overall, ends up being much lower because only a portion of your income is taxed at that 22 percent rate.
For couples who are married filing jointly, the portion of their income taxed at 10% is actually twice as large; meaning the portion of their income that’s taxed at 10% goes up to $23,850 instead of the $11,925 deduction you’d receive if you were filing single.
Knowing what tax bracket you’ll be in also helps you understand how important deductions are and what their impact can be on your taxable income. For example, in the 22% tax bracket, a $1,000 deduction would save you $220 in taxes.
The above guidelines are for ordinary income, but not all income falls under these tax bracket thresholds. For example, long-term capital gains and qualified dividends (assets held for more than a year) are taxed at specific rates of 0%, 15%, or 20%, depending on your total taxable income and your filing status. Short-term capital gains are taxed as regular income.
Is my 2025 income tax bracket going to be different from last year?
Income thresholds for each tax bracket are updated every year. However, the seven tax bracket percentages have remained unchanged since the 2018 tax year.
The tax bracket percentages were due to revert to the higher, pre-2018 levels at the end of 2025, but were made permanent by the “One Big Beautiful Bill,” legislation which was passed by Congress and signed by the President in July 2025. This legislation has locked the tax bracket percentages at the following levels:
10%, 12%, 22%, 24%, 32%, 35% and 37%.
The 2025 income thresholds for these brackets are listed in the chart below:
2025 Rates
| Tax Rates | Threshold for Filing Single | Threshold for Married Filing Jointly |
| 10% | $0 to $11,925 | $0 to $23,850 |
| 12% | $11,926 to $48,475 | $23,851 to $96,950 |
| 22% | $48,476 to $103,350 | $96,951 to $206,700 |
| 24% | $103,351 to $197,300 | $206,701 to $394,600 |
| 32% | $197,301 to $250,525 | $394,601 to $501,050 |
| 35% | $250,526 to $626,350 | $501,051 to $751,600 |
| 37% | $626,351 and over | $751,601 and over |
2026 Rates
| Tax Rates | Threshold for Filing Single | Threshold for Married Filing Jointly |
| 10% | $0 to $ 12,400 | $0 to $24,800 |
| 12% | $ 12,401 to $ 50,400 | $ 24,801 to $ 100,800 |
| 22% | $ 50,401 to $ 105,700 | $ 100,801 to $ 211,400 |
| 24% | $ 105,701 to $ 201,775 | $ 211,401 to $ 403,550 |
| 32% | $ 201,776 to $ 256,225 | $ 403,551 to $ 512,450 |
| 35% | $ 256,2256 to $ 640,600 | $ 512,451 to $ 768,700 |
| 37% | $ 640,601.00 and over | $768,701 and over |
Understanding how tax brackets work, as well as which bracket you are in, can help you make better-informed financial decisions. However, be sure to consult your financial professionals at Petro & Co PLLC for more information.
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