How tax brackets actually work
Your income is taxed in slices, not all at one rate. A worked example with the 2026 figures.
0:56
Read the full guide: How Tax Brackets Work: A Step-by-Step Guide With Examples
Transcript
How tax brackets actually work
Your taxable income is cut into slices. Each slice is taxed at its own rate.
Take a single filer with $80,000 of taxable income in 2026.
The first $12,400 is taxed at 10%. The next $38,000 at 12%. The last $29,600 at 22%.
That is $12,312 of federal income tax: a 22% top bracket, but a 15.4% effective rate.
A raise that crosses into the next bracket only taxes the dollars above the line.
In the example, $1,000 more pay adds $180 of tax. You never lose money by earning more.
Brackets apply to taxable income, which is what is left after your deductions.
