Tax Bracket

The income range that determines what percentage rate applies to that portion of your taxable income under the US progressive tax system.

A tax bracket is a range of taxable income taxed at a specific rate under the federal (and most state) progressive income tax systems. The US federal system has seven brackets: 10%, 12%, 22%, 24%, 32%, 35%, and 37% (as of 2024). The critical misconception about brackets is that crossing into a higher bracket doesn't mean all your income is taxed at the new rate — only the income above each threshold is taxed at that bracket's rate. Every dollar you earn is taxed at the rate for the bracket it falls into, not the bracket your total income lands in.

To find your bracket, start with gross income, subtract above-the-line adjustments (401(k) contributions, HSA contributions, student loan interest, etc.) to get adjusted gross income (AGI), then subtract either the standard deduction or itemized deductions to arrive at taxable income. That final number is what gets divided across the brackets. For 2024, the standard deduction is $14,600 for single filers and $29,200 for married filing jointly — meaning a single person earning $70,000 in gross income might have taxable income closer to $50,000 after deductions.

Understanding brackets matters practically for planning decisions: traditional 401(k) contributions reduce your taxable income dollar-for-dollar, potentially keeping you in a lower bracket. A year-end bonus might push income into the next bracket — but only the amount above the threshold is taxed at the higher rate, not the whole bonus. Selling RSUs or exercising stock options in a high-income year compounds bracket exposure and is worth modeling in advance with a tax professional.