Federal income tax rates are set by Congress and change based on how much money you earn

The federal government taxes your income at different rates depending on your total earnings for the year. The more you earn, the higher the rate applied to your top dollars — this is called a progressive tax system. The rates themselves change when Congress passes new tax laws, most recently in 2017 with changes that took effect through 2025.

Your actual tax bill depends on three things: your total income, your filing status (single, married filing jointly, head of household, and so on), and which tax bracket your income falls into. The rate you see in a tax table is not the rate applied to all your money — it applies only to income within that specific bracket.

Understanding how brackets work prevents a common mistake: many people think moving into a higher bracket means all their income gets taxed at the higher rate. That is not how it works. Only the dollars within that bracket are taxed at that rate.

Key Takeaways

  • Tax rates range from 10 percent to 37 percent depending on your income level and filing status, with higher earners paying higher rates on their top dollars only.
  • Your tax bracket is determined by your total income for the year, and only the money within that bracket is taxed at that bracket's rate.
  • Tax rates are set by federal law and change when Congress passes new legislation; the current rates are scheduled to change again after 2025.
  • Your filing status (single, married filing jointly, head of household) determines which income thresholds apply to you.
  • The tax rate you pay on your last dollar of income is called your marginal rate, while your average rate across all income is your effective rate.

The seven federal tax brackets and how they work

There are seven federal tax brackets for the 2024 tax year. The brackets are: 10 percent, 12 percent, 22 percent, 24 percent, 32 percent, 35 percent, and 37 percent. Each bracket applies to a range of income, and that range depends on your filing status.

For a single filer in 2024, the 10 percent bracket covers income from $0 to $11,600. The 12 percent bracket covers $11,601 to $47,150. The 22 percent bracket covers $47,151 to $100,525. The brackets continue upward, with the 37 percent bracket applying to income over $578,100. For married couples filing jointly, the income ranges are roughly double, reflecting the combined household income.

Here is what this means in practice: if you are single and earn $60,000, you do not pay 22 percent on all of it. You pay 10 percent on the first $11,600, then 12 percent on the next $35,550, then 22 percent on the remaining $12,850. Your total tax is the sum of those three amounts, not 22 percent of $60,000.

The difference between marginal rate and effective rate

Your marginal tax rate is the rate applied to your last dollar of income — the rate of the bracket you fall into. Your effective tax rate is your total tax bill divided by your total income. These are almost never the same number, and the difference matters when you are thinking about whether a raise or side income is worth it.

Using the $60,000 example above: your marginal rate is 22 percent (the rate on your top dollars), but your effective rate is lower — roughly 10.6 percent. That means on average, across all your income, you paid about 10.6 percent to federal income tax. If you earn an extra $1,000, you will pay 22 percent on it (your marginal rate), not 10.6 percent.

This matters because people sometimes avoid earning more money thinking they will move into a higher bracket and lose money overall. That cannot happen. Moving into a higher bracket only affects the dollars in that new bracket, not the dollars you already earned.

How filing status affects your tax brackets

The income ranges for each bracket change based on whether you file as single, married filing jointly, married filing separately, or head of household. Married couples filing jointly have wider brackets than single filers, meaning you can earn more before hitting a higher rate.

For example, in 2024, the 22 percent bracket for a single filer starts at $47,151. For married filing jointly, it does not start until $94,301. This is one reason married couples often pay less total tax than two single people earning the same combined income — the brackets are wider.

Head of household status (used by unmarried people supporting dependents) falls between single and married filing jointly. Married filing separately has the narrowest brackets and usually results in the highest total tax, which is why most married couples file jointly.

Standard deduction and how it reduces your taxable income

Before the tax brackets apply, you subtract the standard deduction from your income. This is a fixed amount set by Congress that reduces the income you actually pay tax on. For 2024, the standard deduction is $14,600 for single filers, $29,200 for married filing jointly, and $21,900 for head of household.

This means if you are single and earn $60,000, you do not pay tax on the full $60,000. You subtract $14,600, leaving $45,400 in taxable income. The tax brackets then apply to that $45,400, not the original $60,000. If your income is below the standard deduction for your filing status, you owe no federal income tax.

The standard deduction changes each year, usually increasing slightly to account for inflation. Some people instead itemize deductions (listing specific expenses like mortgage interest or charitable donations) if that total is higher than the standard deduction, but most people use the standard deduction because it is simpler and often larger.

Tax credits and how they differ from deductions

A tax credit is different from a deduction. A deduction reduces your taxable income; a credit reduces your actual tax bill dollar-for-dollar. A $1,000 deduction might save you $220 in tax (if you are in the 22 percent bracket). A $1,000 credit saves you exactly $1,000 in tax.

Common federal tax credits include the Earned Income Tax Credit (EITC) for lower-income workers, the Child Tax Credit for parents, and the American Opportunity Credit for students. Some credits are refundable, meaning if the credit is larger than your tax bill, you receive the difference as a refund. Others are non-refundable, meaning they can reduce your tax to zero but not below.

Credits are usually worth more than deductions of the same dollar amount, which is why tax planning often focuses on finding credits you may be may have access to to. The IRS website lists all available credits, and tax software typically walks you through questions to determine which ones apply to you.

When tax rates change and how to stay informed

Congress sets federal tax rates through legislation. The current rates were established by the Tax Cuts and Jobs Act of 2017 and are scheduled to expire after December 31, 2025, unless Congress extends them. If they expire, rates will revert to the pre-2017 levels, which were higher for most income ranges.

Tax rates can also change mid-year if Congress passes new legislation, though this is uncommon. More commonly, the income thresholds for each bracket adjust annually for inflation. The IRS announces the new brackets and standard deduction amounts each October or November for the following tax year.

To stay informed, check the IRS website (irs.gov) in late fall for the next year's brackets and deduction amounts. If you use tax software or work with a tax preparer, they will use the current rates automatically. If you calculate taxes by hand or want to estimate your liability, using outdated brackets will give you an incorrect result.

Frequently Asked Questions

Does earning more money ever result in taking home less pay?

No. Moving into a higher tax bracket only affects the dollars in that new bracket. If a raise pushes you from the 22 percent bracket into the 24 percent bracket, you still keep all the money in the lower brackets at the lower rates. You will always take home more from a raise, even if some of the new income is taxed at a higher rate.

What is the difference between federal income tax and FICA taxes?

Federal income tax is withheld based on your tax bracket and filing status. FICA taxes (Social Security and Medicare) are separate and are withheld at flat rates: 6.2 percent for Social Security and 1.45 percent for Medicare, plus an additional 0.9 percent Medicare tax on high earners. Both appear on your paycheck, but they are calculated differently and fund different programs.

Can I reduce my federal income tax by changing my filing status?

Your filing status must match your actual situation on December 31 of the tax year — you cannot choose it for tax purposes. However, your status can affect your tax bill significantly. Married couples filing jointly usually pay less than filing separately. If you are unmarried and support dependents, head of household status may save you money compared to single status.

What happens if I do not have enough tax withheld during the year?

If too little tax is withheld from your paychecks, you will owe money when you file your return. The IRS charges interest and penalties on unpaid taxes. You can adjust your withholding by changing your W-4 form with your employer, or you can make estimated quarterly tax payments if you have income not subject to withholding, like self-employment income.

Are capital gains taxed at the same rates as regular income?

No. Long-term capital gains (profits from selling investments held over one year) are taxed at lower rates: 0 percent, 15 percent, or 20 percent depending on your income level. Short-term capital gains (held one year or less) are taxed as ordinary income at your regular bracket rate. This is why investment income is often taxed differently than wages.