How to read a marginal tax bracket
Use the rate that applies to the next dollar you earn.
1
Enter taxable income
Use income after deductions rather than gross salary.
2
Add the bracket ceiling
Take the upper limit of the bracket that contains your income.
3
Test extra income
The result shows the tax on that slice and the amount you keep.
What does this tool do?
The marginal rate applies only to the next dollar of taxable income, not to every dollar already earned. Entering the bracket ceiling shows how much room is left before a higher rate starts.
The Formula
Tax on extra income = Extra income × Marginal rate; room left = Bracket ceiling − Taxable incomeFrequently Asked Questions
Is the marginal rate the same as the effective rate?
No. The effective rate is total tax divided by total income, so it is lower than the marginal rate in a progressive system.
Why does the bracket ceiling matter?
It marks the point where the next rate begins. Only income below the ceiling is taxed at the current marginal rate.