Understanding Tax Brackets: You Don't Pay 24% on Everything
The most common tax misconception costs people money every year. Here is how marginal tax brackets actually work.
The number one tax misunderstanding: "I got a raise that put me in the 24% bracket, so now I pay 24% on all my income." Wrong. You pay 24% only on the income ABOVE the bracket threshold. Everything below is still taxed at lower rates.
How Brackets Actually Work (2025-2026)
A single filer earning $100,000 pays: 10% on the first $11,600 ($1,160) + 12% on $11,601-$47,150 ($4,266) + 22% on $47,151-$100,525 ($11,742) = $17,168 total, an effective rate of 17.2% — not 22%. The marginal rate (highest bracket) is always higher than your effective rate (what you actually pay).
Why This Matters
People turn down raises, bonuses, and overtime because they think earning more will cost them more in taxes. It never does. Every additional dollar is taxed at your marginal rate, but you always keep 60-90 cents of every extra dollar earned. There is no scenario where earning more results in less take-home pay.