6 Key Things to Know About Tax Brackets

When it comes to taxes, one of the most important concepts to understand is your tax bracket. It determines how much of your income is taxed — and knowing where you fall can help you make smarter financial decisions, plan deductions, and avoid surprises at tax time.

In this article, we’ll walk you through the 6 essential things you need to know about tax brackets, including how they work, current tax rates, and how to potentially reduce your taxable income.

1. What Is a Tax Bracket?

A tax bracket is a range of income taxed at a specific rate. The U.S. uses a progressive tax system, which means the more you earn, the higher the percentage of your income is taxed — but not all of your income is taxed at that higher rate.

For example, if you’re in the 22% tax bracket, it doesn’t mean all your income is taxed at 22%. Only the income that falls within that bracket range is taxed at that rate.

To learn more, see the IRS’s official guide on How the U.S. Tax System Works.

2. What Are the Current Federal Tax Brackets?

As of the 2024 tax year (filing in 2025), there are seven federal income tax brackets:

Tax Rate	Single Filers	Married Filing Jointly
10%	Up to $11,600	Up to $23,200
12%	$11,601 – $47,150	$23,201 – $94,300
22%	$47,151 – $100,525	$94,301 – $201,050
24%	$100,526 – $191,950	$201,051 – $383,900
32%	$191,951 – $243,725	$383,901 – $487,450
35%	$243,726 – $609,350	$487,451 – $731,200
37%	Over $609,350	Over $731,200

Source: IRS – Tax Brackets for 2024

These brackets are adjusted annually for inflation and vary based on filing status (e.g., single, married filing jointly, head of household).

3. How Marginal Tax Rates Work

Understanding marginal tax rates is key. Here’s how it works in practice:

Let’s say you’re a single filer earning $60,000:

The first $11,600 is taxed at 10%
The next $35,550 ($47,150 – $11,600) is taxed at 12%
The remaining $12,850 ($60,000 – $47,150) is taxed at 22%

This doesn’t mean your entire $60,000 is taxed at 22%. Your effective tax rate (what you actually pay on average) will be lower than your highest marginal rate.

Try a calculator like SmartAsset’s Tax Calculator to estimate your effective tax rate.

4. Federal vs. State Tax Brackets

Federal tax brackets apply across the U.S., but state income taxes vary widely:

Some states have flat taxes (e.g., Colorado, with a flat 4.4%)
Others use progressive brackets, like California and New York
Nine states have no state income tax, including Florida, Texas, and Nevada

Your total tax liability depends on both federal and state tax systems.

To check your state’s tax structure, visit the Tax Foundation’s State Individual Income Tax Rates.

5. How to Reduce Your Taxable Income

Want to lower the amount of income that’s subject to higher tax brackets? Here are some effective strategies:

✅ Contribute to Retirement Accounts

Traditional 401(k) or IRA contributions reduce your taxable income
In 2024, you can contribute up to $23,000 to a 401(k) if you’re over 50

✅ Use Health Savings Accounts (HSAs)

Contributions to HSAs are tax-deductible and grow tax-free if used for medical expenses

✅ Claim Deductions and Credits

Standard deduction for 2024 is $14,600 for single filers and $29,200 for married couples filing jointly
Consider itemizing if deductions (mortgage interest, charitable donations) exceed the standard deduction

Review all eligible deductions at the IRS Deductions and Credits Page.

6. Common Misconceptions About Tax Brackets

Let’s clear up some confusion that many people have:

Myth: “If I move into a higher tax bracket, I’ll take home less money.”
Truth: Only the income within that bracket range is taxed at the higher rate.
Myth: “Everyone pays the same rate in a bracket.”
Truth: Your total tax bill is a blend of rates across different brackets.
Myth: “Deductions work the same as tax credits.”
Truth: Deductions reduce taxable income, while credits reduce your tax bill dollar-for-dollar.

Understanding these differences can help you plan better and avoid costly mistakes.

Final Thoughts: Know Your Bracket, Plan Smartly

Tax brackets may seem intimidating, but once you understand how they work, you’ll see that the system is designed to tax income progressively — not penalize you for earning more.

By knowing which bracket you fall into, and how to strategically reduce your taxable income, you can make better financial decisions throughout the year — not just during tax season.