Tax brackets and rates

Tax brackets are ranges of income, each with an increasingly larger base or starting point, such as $0 to $7,500 and $7,500 to $15,000. There are six federal tax brackets, and each bracket is taxed at a different rate — the first at 10%, the second at 15%, the third at 25%, the fourth at 28%, the fifth at 33%, and the last at 35%. So, for example, if your taxable income were high enough to fall in the third bracket, you’d pay 10% of the amount in the first bracket, 15% of the amount in the second bracket, and 25% of the rest.

While the tax rates remain the same, the dollar amounts of the tax brackets for each filing status are different. So if you’re single you may owe a different amount of tax than what a married couple with the same taxable income will owe — assuming your tax situations are otherwise similar.

The top rate you pay is called your marginal tax rate, and the actual rate you pay on all your taxable income is your effective tax rate. You find your effective rate by dividing the amount of tax you pay by your total taxable income.