Marginal Tax Rate Calculator

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Frequently Asked Questions

What is marginal tax rate?

Your marginal tax rate is the rate you would pay on one additional dollar of income. In the US progressive system, it is the highest tax bracket that applies to your income. For example, if you are in the 22% bracket, your marginal rate is 22%.

How is marginal tax rate different from effective tax rate?

Marginal rate is what you pay on the next dollar earned. Effective rate is your total tax divided by total income - your average rate. Marginal rate is always higher than effective rate in a progressive system.

Why is marginal tax rate important?

Marginal rate matters for financial decisions: how much tax you save from extra deductions, how much you pay on additional income (side hustle, bonus, overtime), and whether to contribute to Traditional vs Roth retirement accounts.

How do I find my marginal tax rate?

Find your taxable income and filing status, then see which bracket your income falls into. Use this calculator or check the IRS tax bracket table. Your marginal rate is the rate shown for the bracket that contains your last dollar of income.

What is the highest marginal tax rate?

The highest federal marginal tax rate is 37% for income above $609,350 (single) or $731,200 (married filing jointly) in 2024. Adding NIIT (3.8%) and state taxes, the top combined marginal rate can exceed 50% in high-tax states like California.

What is the lowest marginal tax rate?

The lowest marginal rate is 0% for income covered by the standard deduction ($14,600 for single filers in 2024). After that, the first bracket is 10% up to $11,600. The effective starting point for tax is income above your deduction amount.

How does overtime affect my marginal rate?

Overtime pay is added to your regular income. If it pushes you into a higher bracket, only the overtime dollars in the higher bracket are taxed at the higher rate. Your base income is still taxed at lower rates.

How does a bonus affect my marginal rate?

Bonuses are taxed at your marginal rate. However, employers can use the flat 22% withholding method. If your marginal rate exceeds 22%, you will owe additional tax when filing. If it is below 22%, you may get a refund.

What is the marginal rate on capital gains?

Long-term capital gains have their own marginal rates: 0%, 15%, or 20% (plus 3.8% NIIT if applicable). These rates apply on top of your ordinary income. Your marginal long-term gains rate depends on your total taxable income.

What is the marginal rate for the Net Investment Income Tax?

NIIT adds 3.8% to your marginal rate on investment income when your MAGI exceeds $200,000 (single) or $250,000 (joint). This means your true marginal rate on investment income could be 23.8% (20% + 3.8%) or 40.8% (37% + 3.8%).

How does marriage affect marginal rates?

Married couples filing jointly have wider brackets, so the marginal rate may be lower than two single filers with the same combined income. However, a two-earner couple may face a higher marginal rate than if they filed as singles.

What is the marginal rate for self-employment income?

Self-employed individuals pay both income tax (at their marginal rate) and self-employment tax of 15.3%. The effective marginal rate on SE income is approximately marginal rate + 14.13% (after the SE tax deduction).

How do deductions affect marginal rate?

Deductions reduce taxable income, which may lower your marginal rate if they push you below a bracket threshold. Each dollar of deduction saves you tax at your current marginal rate, making deductions more valuable for high-bracket taxpayers.

How do tax credits affect marginal rate?

Tax credits directly reduce tax liability (not taxable income). A $1,000 non-refundable credit saves $1,000 regardless of marginal rate. Some credits phase out at certain income levels, creating a "hidden" increase in marginal rate during the phaseout range.

What is the phaseout marginal rate?

Phaseouts of deductions and credits create hidden marginal rate increases. For example, the Child Tax Credit phases out at $200,000 AGI (single), adding approximately 5% to the marginal rate over the phaseout range. The student loan interest deduction and IRA deduction phaseouts also create rate bumps.

What is the marginal rate for Social Security taxation?

When Social Security benefits become taxable (combined income over $25,000 single), each additional dollar of income can cause up to 85 cents of benefits to become taxable. This can create a marginal rate of up to 22.2% on the benefit portion, on top of the regular 10-12% rate on that dollar.

How does the Pease limitation affect marginal rates?

The Pease limitation (currently suspended until 2026) reduced itemized deductions for high-income taxpayers, effectively increasing their marginal rate by about 1-2%. It phases in as income exceeds certain thresholds.

What is the marginal rate for high-income earners?

High earners face multiple layers: 37% top bracket, 3.8% NIIT, phaseouts of deductions, and state taxes. A California resident earning over $1M could face a combined federal + state marginal rate exceeding 50% (37% federal + 13.3% CA + 3.8% NIIT + phaseout effects).

How does state income tax affect marginal rate?

State income taxes are deductible on federal returns (as part of SALT deduction, capped at $10,000). This creates an interaction: state taxes reduce federal taxable income, slightly reducing the effective combined marginal rate for those who itemize.

What is the marginal rate for Alternative Minimum Tax?

AMT has two rates: 26% and 28%. Taxpayers in AMT face a marginal rate of 26% or 28% depending on their AMT income. During the AMT exemption phaseout (when the exemption is reduced as income increases), the marginal AMT rate can reach 35%.

What is the marginal rate for the Net Operating Loss deduction?

NOL deductions carry forward to offset future income. They save tax at the marginal rate in the year they are used. The CARES Act allowed NOL carrybacks for 2018-2020 losses, creating tax savings at the marginal rate of the carryback year.

How does the marginal rate affect Roth vs Traditional IRA decisions?

If your current marginal rate is high and expected future rate is lower, favor Traditional IRA (pre-tax). If current rate is low and future rate is expected higher, favor Roth IRA (after-tax). Your marginal rate today versus retirement is the key comparison.

What is the breakpoint between marginal brackets?

Bracket breakpoints are the income thresholds where the marginal rate changes. For single filers in 2024: $11,600 (10% to 12%), $47,150 (12% to 22%), $100,525 (22% to 24%), $191,950 (24% to 32%), $243,725 (32% to 35%), $609,350 (35% to 37%).

How does the marginal rate affect investment decisions?

Your marginal rate determines the after-tax return on investments. Municipal bonds become more attractive in high marginal brackets because their interest is federally tax-free. Tax-efficient investments (index funds, buy-and-hold) are more important in high brackets.

What is the marginal rate for passive activity losses?

Passive activity losses can offset passive income. When suspended passive losses are used (upon disposal of the activity), they offset income at your marginal rate in the year of disposal. This can create significant tax savings at high marginal rates.

How does the marginal rate affect charitable giving?

Charitable donations are deductible at your marginal rate. A $1,000 donation saves $370 in tax if you are in the 37% bracket, $220 if in the 22% bracket. Bunching multiple years of donations into one year can increase itemized deductions beyond the standard deduction.

What is the marginal rate for the Saver's Credit?

The Saver's Credit provides a credit of 10-50% of retirement contributions. The credit has its own phaseout, creating a hidden marginal rate increase. For example, each additional dollar of income could reduce the credit and increase tax simultaneously.

How does the marginal rate affect home mortgage interest?

Mortgage interest on up to $750,000 of acquisition debt is deductible if you itemize. The tax savings equal your marginal rate times the interest paid. In the 22% bracket, $10,000 of mortgage interest saves $2,200 in tax.

What is the long-term capital gains marginal rate?

Long-term gains are stacked on top of ordinary income. Your marginal LTCG rate is 0% if your ordinary income + gains are below $47,025 (single), 15% up to $518,900, and 20% above that. NIIT adds 3.8% for high earners.

How does the marginal rate affect business decisions?

Business owners should consider marginal rates when deciding entity structure (S-Corp vs LLC), when to recognize income, and when to make investments. Section 179 expensing and bonus depreciation provide deductions at the marginal rate.