Your marginal rate is the percentage tax on your next dollar of taxable income. Your effective rate is what fraction of your total income you actually paid in tax. For most people, the effective rate is meaningfully lower than the marginal rate because the bottom layers of income are taxed at 10% and 12%.
The Core Concept
Federal income tax is progressive: income is taxed in layers (brackets), not all at the top rate. A single filer with $100,000 of gross income in 2026:
- Subtracts the $16,100 standard deduction → $83,900 taxable income
- Pays 10% on the first $12,400 → $1,240
- Pays 12% on the next $38,000 → $4,560
- Pays 22% on the remaining $33,500 → $7,370
- Total tax: $13,170
| Rate | Income in bracket | Tax in bracket |
|---|---|---|
| 10% | $12,400 | $1,240 |
| 12% | $38,000 | $4,560 |
| 22% | $33,500 | $7,370 |
| Total | $83,900 | $13,170 |
Marginal rate: 22% (the bracket the top dollars fall in)
Effective rate: $13,170 ÷ $100,000 = 13.17%
The effective rate is 9 percentage points lower than the marginal rate — because the 10% and 12% portions pull the average down. Source: Rev. Proc. 2025-32, §4.01.
Why This Matters in Practice
Evaluating a raise: If someone offers you a $5,000 raise and your marginal rate is 22%, you keep about $3,900 of it in take-home pay (after federal income tax; FICA reduces it further). The $5,000 does not become your new rate on your existing income.
Choosing between traditional and Roth 401(k): The break-even question is whether your marginal rate today is higher or lower than your marginal rate in retirement. Traditional contributions save tax at today’s marginal rate; Roth contributions are tax-free in retirement.
Bonus tax misconceptions: A bonus pushed into the next bracket does not raise the tax on your regular pay. Only the bonus itself (or the portion above the threshold) is taxed at the higher rate.
Effective Rate Examples for 2026 (Single Filer, Standard Deduction)
| Gross income | Federal income tax | Effective rate | Marginal rate |
|---|---|---|---|
| $30,000 | $1,420 | 4.7% | 12% |
| $50,000 | $3,820 | 7.6% | 12% |
| $75,000 | $7,670 | 10.2% | 22% |
| $100,000 | $13,170 | 13.2% | 22% |
| $150,000 | $24,734 | 16.5% | 24% |
| $200,000 | $36,734 | 18.4% | 24% |
| $300,000 | $68,134 | 22.7% | 35% |
All estimates from the 2026 data (Rev. Proc. 2025-32). The effective rate grows slowly at lower incomes because the standard deduction removes a large fraction, and the 10%/12% brackets cover a lot of income.
Combined Federal Effective Rate (Income Tax + FICA)
Most workers care about the combined take: income tax plus the 7.65% FICA. Below $184,500, FICA adds a fixed 7.65%, which shifts the combined effective rate up for lower earners:
| Gross income | Income tax effective | FICA effective | Combined effective |
|---|---|---|---|
| $50,000 | 7.6% | 7.65% | 15.3% |
| $100,000 | 13.2% | 7.65% | 20.8% |
| $200,000 | 18.4% | 7.17%* | 25.5% |
| $250,000 | ~20.3% | ~6.4%* | ~26.7% |
* Social Security stops at the $184,500 wage base, so FICA effective rate falls below 7.65% on higher incomes.
Above $184,500 the FICA effective rate starts declining (only 1.45% Medicare applies to the top dollars), which is why the combined rate rises more slowly at high incomes.
How Deductions Change the Effective Rate
Every dollar of above-the-line deduction — a 401(k) contribution, HSA contribution, or the new senior/overtime/tips deductions — lowers your AGI and taxable income, directly reducing your effective rate. The marginal rate determines how much each deduction saves: a $10,000 traditional 401(k) contribution at a 22% marginal rate saves $2,200 in federal income tax ($10,000 × 22%) and also $765 in FICA if contributed through payroll as a 401(k) deferral.
To compute your own marginal and effective rates, use the federal income tax calculator.