Two percentages describe the same tax return and routinely differ by ten points or more, which is why they are confused so often. The marginal tax rate is the rate that applies to the next dollar of income — the rate on the top slice of earnings. The effective tax rate is the average: total tax divided by total income. One tells you what an extra dollar costs. The other tells you what share of your income went in tax overall. This guide defines both precisely, works them through the 2026 federal brackets for a single filer, and takes up the related rates — capital gains, property tax, payroll tax — that are often mixed into the same conversation by mistake.

The two definitions, side by side

The marginal tax rate is the rate applied to the last dollar of taxable income — and, by extension, to the next dollar earned. If your taxable income sits in the 22 percent bracket, your marginal rate is 22 percent: each additional dollar of taxable income adds 22 cents of tax, until the income crosses into the next bracket. The marginal rate is a rate on a slice. It describes the edge of the income, not the whole of it, and it is the rate that matters for decisions at the margin: whether extra work, an extra shift, or a bonus is worth it after tax, and how much a deduction is worth, because a deduction saves tax at the marginal rate.

The effective tax rate is the average rate across all of the income: total tax divided by total income, multiplied by 100. If you paid $9,870 of tax on $85,000 of income, your effective rate on gross income is 11.61 percent. The effective rate is a summary of the whole return. It is the rate that matters for questions about overall burden — what share of what I earned went in tax — and for comparing tax burdens between people, years, or countries, provided the same definition of income and the same set of taxes is used in each case. The two rates differ because the tax system is progressive: the first slice of income is taxed at 10 percent, the next at 12, the next at 22, and the average across the slices must sit below the rate on the top slice.

The denominator matters as much as the numerator, and it is where most effective-rate confusion lives. An effective rate can be computed on gross income, on taxable income (after deductions), or on adjusted gross income, and the three answers differ. The worked example below gives both the gross-income and taxable-income versions and labels each, because an effective rate quoted without its denominator is not a number anyone can check. The same warning applies to which taxes are included: a rate that includes federal income tax only is not comparable with a rate that includes state tax and payroll tax, and the Effective Tax Rate Calculator on this site lets the reader choose which taxes to include, precisely so that the comparison is made on stated terms.

The 2026 federal brackets

Federal income tax in the United States is charged in brackets: each rate applies only to the income inside its bracket. The 2026 figures below are from IRS Revenue Procedure 2025-32, released in October 2025, and apply to tax year 2026, for returns generally filed in 2027. The standard deduction for 2026 is $16,100 for single filers and $32,200 for married couples filing jointly, and $24,150 for heads of household. Taxable income is gross income minus deductions: the brackets below apply to taxable income, not to gross income, and the worked example shows the subtraction explicitly.

Tax year 2026, IRS Rev. Proc. 2025-32. Each rate applies only to the income inside its bracket.

Read the table as a stack, not as a single rate. A single filer with $68,900 of taxable income does not pay 22 percent on $68,900. They pay 10 percent on the first $12,400, 12 percent on the next $38,000, and 22 percent on the remaining $18,500. The marginal rate is 22 percent, because that is the rate on the top slice and on the next dollar. The effective rate on taxable income is the weighted average of the three slices, which must be below 22 percent. The stacking is the whole mechanism of progressivity, and it is also the whole refutation of the most durable tax myth, taken up after the worked example.

Worked example: $85,000, single filer

Take a single filer with $85,000 of gross income in 2026, claiming the standard deduction and no other adjustments. Taxable income is $85,000 minus $16,100, which is $68,900. The tax stacks as follows: 10 percent of $12,400 is $1,240; 12 percent of the $38,000 between $12,400 and $50,400 is $4,560; 22 percent of the $18,500 between $50,400 and $68,900 is $4,070. Total federal income tax is $1,240 plus $4,560 plus $4,070, which is $9,870. The marginal rate is 22 percent. The effective rate on taxable income is $9,870 divided by $68,900, which is 14.33 percent. The effective rate on gross income is $9,870 divided by $85,000, which is 11.61 percent. Three percentages, one return, each correct on its own definition, and each answering a different question.

The example also shows why the marginal rate is the one that prices decisions. A $1,000 deduction for this filer saves $220 of tax, because the deduction removes $1,000 from the top slice, taxed at 22 percent. A $1,000 bonus costs $220 of tax, for the same reason. Neither figure is 11.61 percent or 14.33 percent of $1,000, because neither the deduction nor the bonus is spread across the whole return: both act at the margin. Conversely, the effective rate is the right number for the question “what share of my pay went in federal income tax this year?” — 11.61 percent of gross income, on the stated basis — and for comparing this year with last year, provided the basis is the same in both years.

Change the inputs and the relationship holds. A married couple filing jointly with $120,000 of gross income takes the $32,200 standard deduction, leaving $87,800 of taxable income, all of it inside the 12 percent bracket: 10 percent of $24,800 is $2,480, and 12 percent of $63,000 is $7,560, for a total of $10,040. Marginal rate 12 percent, effective rate on taxable income 11.44 percent, effective rate on gross income 8.37 percent. The marginal and effective rates are close here because most of the income sits in one bracket. The gap between the two rates grows as income rises through more brackets, and it is largest for high incomes, where the top slice is taxed far above the average. That growth is a feature of the system, not an inconsistency in the arithmetic.

What a raise really costs

The myth: “If I get a raise into the next bracket, I will take home less.” It is false under a bracket system, and the stacking shows why. Only the income above the bracket threshold is taxed at the higher rate. Everything below the threshold keeps its old rate. A raise that crosses a threshold therefore always increases after-tax income, because the part of the raise inside the old bracket is taxed at the old rate, and the part inside the new bracket is taxed at the new rate, which is below 100 percent. No bracket rate in the federal schedule reaches 100 percent, so no crossing can consume the whole raise, let alone eat into existing income.

Worked check: the single filer above, taxable income $68,900, receives a $10,000 raise, taking taxable income to $78,900, still inside the 22 percent bracket. Extra tax is 22 percent of $10,000, which is $2,200, and after-tax income rises by $7,800. Take a larger raise, $40,000, taking taxable income to $108,900, which crosses into the 24 percent bracket at $105,700. Extra tax is 22 percent of the $36,800 up to the threshold, which is $8,096, plus 24 percent of the $3,200 above it, which is $768, for $8,864 in total. After-tax income rises by $31,136. At no point does the crossing reduce take-home pay. What can reduce take-home pay around a raise is something else entirely — loss of a benefit, a cliff in a credit or subsidy, or a change in payroll deductions — and those cliffs are real and worth checking separately, but they are not the brackets, and blaming the brackets hides the actual cause.

Capital gains: a separate schedule

Capital gains — profit from selling an asset such as shares or property — are taxed under their own schedule in the United States, and mixing them into the ordinary marginal rate is a common source of error. Long-term gains, on assets held more than a year, are generally taxed at preferential rates of 0, 15, or 20 percent, depending on taxable income and filing status, with an additional net investment income tax applying above higher thresholds. Short-term gains, on assets held a year or less, are taxed as ordinary income, at the ordinary brackets. The distinction matters for the effective rate: a return whose income is mostly long-term gains can show a low effective rate alongside a high ordinary marginal rate, because the two kinds of income were taxed on different schedules.

The practical rule is to keep the schedules separate in any calculation. Compute ordinary tax on ordinary income through the brackets above, compute capital gains tax on the gains schedule that applies for the year, add them for the total, and divide by total income for the effective rate, stating what was included. Do not apply the ordinary marginal rate to a capital gain, and do not apply a capital gains rate to wages. Thresholds for the preferential rates are adjusted annually and differ by filing status, so the figures for the year in question should be taken from the IRS for that year, not carried over from a previous year’s guide. The Effective Tax Rate Calculator on this site treats the taxes the reader enters as given; the schedule a gain belongs on is a question for the tax return, and for a tax professional where the amounts are large.

Property tax: a different base entirely

Property tax is sometimes quoted as an “effective rate” too, and it uses a different base: tax divided by the property’s assessed or market value, not by income. A home assessed at $300,000 with an annual property tax bill of $3,600 carries an effective property tax rate of 1.2 percent. That percentage and an income-tax effective rate of 11 percent are not comparable numbers: one is a share of a stock of value, the other a share of a flow of income, and putting them side by side as if they were the same kind of rate is a category error. Property tax rates vary widely by jurisdiction, because they are set locally against local assessed values, and the same home can carry very different bills in different counties for the same market value.

The same base discipline applies to any “effective rate” claim. Always ask: rate of what, on what? An effective rate on income answers a question about burden on earnings. An effective rate on property value answers a question about the carrying cost of owning. An effective rate on consumption — sales tax paid divided by spending — answers a third question again. Each is legitimate on its own base, and each is misleading on another’s. Where a single “total effective rate” is quoted, it should state every tax included and the income definition used, or it should not be trusted, because the choice of inclusions moves the answer more than any rounding ever could.

Payroll tax and state tax: what counts in the rate

Federal income tax is only part of what most workers pay. Payroll taxes — Social Security and Medicare in the United States — are charged on wages under their own rules, including the Social Security wage base cap, above which the Social Security portion stops, while the Medicare portion continues. State income tax is charged under each state’s own brackets, and some states have no income tax at all. Whether any of these belong in an “effective tax rate” depends on the question being asked. A rate that measures the federal income tax burden excludes them. A rate that measures the total tax wedge on earnings includes them, and the employer’s share of payroll tax is sometimes included too, on the argument that it is part of the cost of the worker’s labour. There is no single correct inclusion set. There is only a stated one, and the statement is part of the answer.

The wage-base cap creates the most interesting pattern in the payroll-inclusive rate. Because Social Security tax stops above the cap, the payroll-inclusive effective rate rises with income up to the cap and then falls as a share of further income, which is the opposite pattern from the income-tax schedule. A worker below the cap and a worker far above it can therefore show payroll-inclusive effective rates that move in opposite directions with a raise, and neither movement says anything about fairness without the full picture of benefits and incidence. The hub page’s deep dive on the payroll cap isolates exactly this effect, holding everything else fixed, and it is the clearest demonstration on this site of why the definition of the rate must be stated before the number is debated.

Notes for the UK and Canada

The United Kingdom and Canada use the same marginal-versus-effective distinction, with their own schedules. The UK charges income tax in bands above a personal allowance, with National Insurance contributions alongside, and the marginal rate on the top slice of earnings is again the rate that prices an extra pound, while the effective rate averages across the bands and the allowance. Canada charges federal tax in brackets plus provincial or territorial tax, so a Canadian marginal rate is usually quoted as a combined federal-plus-provincial rate, and the effective rate again averages across both schedules. In both countries, as in the United States, crossing into a higher band taxes only the income inside the new band, and the “raise makes me poorer” myth is equally false for the same reason.

One cross-border caution: allowances and credits change the denominator. The UK personal allowance is withdrawn above a threshold, which creates a zone where the effective marginal rate exceeds the headline band rate, and Canada’s benefit clawbacks create similar zones. Those are features of the allowance and benefit design, not of the bracket structure, and they should be analysed as such, with the year’s figures from HMRC or the Canada Revenue Agency. This guide’s worked examples use United States federal figures, because that is the calculator’s home basis; the method — stack the slices, average for the effective rate, price decisions at the margin — is the same everywhere a progressive schedule exists.

Frequently asked questions

What is the difference between a marginal tax rate and an effective tax rate?

The marginal rate is the tax rate on the next dollar of taxable income, the rate on the top slice. The effective rate is the average rate: total tax divided by total income. The effective rate is almost always lower, because lower slices of income are taxed at lower rates. In the worked example, a single filer at $85,000 has a 22 percent marginal rate and an 11.61 percent effective rate on gross income.

How do I calculate my effective tax rate?

Divide total tax by total income and multiply by 100, stating which taxes are included and which income definition is used. For federal income tax only, on gross income, the example filer pays $9,870 on $85,000, which is 11.61 percent. On taxable income of $68,900, the same tax is 14.33 percent. Both are correct on their stated bases, and the basis must be quoted with the number.

How do I calculate my marginal tax rate?

Find the bracket your last dollar of taxable income falls in, using the current year schedule for your filing status. For 2026, a single filer with $68,900 of taxable income is in the 22 percent bracket, so the marginal rate is 22 percent. Each additional dollar of taxable income adds 22 cents of tax until income crosses $105,700, where the marginal rate becomes 24 percent.

Can moving into a higher tax bracket reduce my take-home pay?

No, not through the brackets alone. Only the income inside the new bracket is taxed at the higher rate, and no bracket rate reaches 100 percent, so a raise always increases after-tax income. A fall in take-home pay around a raise comes from something else, such as losing a benefit or a credit cliff, or a change in deductions, and that cause should be identified separately rather than blamed on the brackets.

Is the effective tax rate the same as the marginal tax rate?

No. They are equal only in the unusual case where all income is taxed at a single rate, such as income entirely inside the first bracket with no deductions. In every progressive system the effective rate sits below the marginal rate, because the average across slices taxed at 10, 12, and 22 percent must be below 22 percent. Quoting one as if it were the other overstates or understates the burden by the whole gap.

Do capital gains count in my effective tax rate?

They count in the total tax and the total income, but they are taxed on their own schedule: long-term gains generally at preferential rates of 0, 15, or 20 percent, short-term gains as ordinary income. Keep the schedules separate when computing the tax, add the results for the total, and state the inclusion. Applying the ordinary marginal rate to a long-term gain overstates the tax on it.