Marginal Tax Rate
The tax rate applied to the last dollar of income earned — the rate on income in the highest bracket reached.
What is Marginal Tax Rate?
The marginal tax rate is the rate of tax applied to the next dollar of taxable income — equivalently, the rate applied to the highest bracket your income falls into. It differs from the effective tax rate (the average rate paid across all income). Because the US uses a progressive tax system, your marginal rate is higher than your effective rate: lower portions of income are taxed at lower rates, and only the top slice of income faces the marginal rate. Marginal tax rates matter for financial decisions such as Roth vs. traditional IRA contributions, tax-loss harvesting, and timing income or deductions — since they determine the true after-tax cost or benefit of each incremental dollar.
Example
A single filer earning $120,000 of taxable income in 2025 has a marginal tax rate of 22% (the bracket for income from $48,475 to $103,350 is 22%, and the portion from $103,350 to $120,000 falls in the 24% bracket — so the marginal rate is 24%). But their effective tax rate is lower, roughly 17–18%, because most of their income was taxed at 10% and 12%.
Source: IRS — 2025 Tax Rate Schedules