Most modern tax systems are progressive: different income slices are taxed at different rates. Being 'in' the 22% bracket doesn't mean paying 22% on all your income — only on the portion above the previous bracket's threshold.
Understanding your marginal rate helps size decisions like traditional vs Roth contributions, whether to take a bonus this year or next, and how much a deduction is worth.
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Open Financial OS →Frequently asked questions
Marginal vs effective rate?
Marginal is the rate on your next dollar. Effective is total tax divided by total income — always lower than the marginal rate in a progressive system.
Related terms
Gross income
Total earnings before taxes, deductions, or other withholdings.
Net income
A company's bottom-line profit after all expenses, interest, and taxes.
Capital gain
The profit made when you sell an investment for more than you paid.
Tax-advantaged account
An account that lets investments grow with reduced or deferred tax.