Tax Bracket
Income ranges that are taxed at specific rates.
Tax brackets are the income ranges in the progressive US tax system, each taxed at a specific rate from 10% to 37%. Moving into a higher bracket does not mean all income is taxed at that rate—only the portion within the new bracket is. The brackets are adjusted annually for inflation and differ by filing status.
Example
A single filer earning $100,000 pays 10% on the first $11,600, 12% on $11,601–$47,150, 22% on $47,151–$100,525, resulting in a blended effective rate below 22%.
Why It Matters for Your Business
Misunderstanding brackets leads to poor decisions—earning more money always leaves you with more after-tax income because only the additional income hits the higher rate.
Related Terms
More Taxes Terms
Adjusted Gross Income
Gross income minus specific deductions like retirement contributions.
Tax Audit
An examination of tax returns by the IRS to verify accuracy.
Capital Gains
Profit from selling an asset for more than its purchase price.
Capital Loss
Loss from selling an asset for less than its purchase price.
Tax Deduction
An expense that reduces taxable income.
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