Marginal Tax Rate
The marginal tax rate is the tax rate applied to your last dollar of taxable income, representing the percentage of tax you would pay on an additional dollar of income within your current tax bracket.
Exam Tip
Marginal rate = rate on LAST dollar. Effective rate = total tax / total income. Know the 2025 brackets.
What is Marginal Tax Rate?
The marginal tax rate is the percentage of tax applied to your income for each tax bracket in which you qualify. Your marginal rate is the rate you pay on your "last dollar" of taxable income.
2025 Federal Income Tax Brackets
| Tax Rate | Single Filers | Married Filing Jointly |
|---|---|---|
| 10% | $0 - $11,925 | $0 - $23,850 |
| 12% | $11,926 - $48,475 | $23,851 - $96,950 |
| 22% | $48,476 - $103,350 | $96,951 - $206,700 |
| 24% | $103,351 - $197,300 | $206,701 - $394,600 |
| 32% | $197,301 - $250,525 | $394,601 - $501,050 |
| 35% | $250,526 - $626,350 | $501,051 - $751,600 |
| 37% | Over $626,350 | Over $751,600 |
Marginal vs. Effective Tax Rate
| Concept | Definition |
|---|---|
| Marginal Rate | Rate on last/next dollar |
| Effective Rate | Total tax / Total income |
Common Misconceptions
- "I'll lose money if I earn more" - FALSE. Only the additional income is taxed at the higher rate.
Study This Term In
Series 7 Study Guide 2025-2026: Complete Prep Book for the FINRA General Securities Representative Certification with 10 Full Length Practice Tests and 1500+ Questions & Detailed Answers.
$29.99 · 
Prep course on Achievable
Practice exams on ExamEdge
Take courses on Udemy
Online course on Mometrix
Related Terms
10 free AI interactions per day
Stay Updated
Get free exam tips and study guides delivered to your inbox.