How to Calculate Marginal Tax Rate
What is Marginal Tax Rate?
Marginal tax rate is the percentage of tax on the last dollar earned. It's the rate applied to your next dollar of income and important for financial decisions about earning more.
Formula
Marginal rate = Tax bracket rate for the highest income bracket
Step-by-Step Guide
- 1Determine total taxable income
- 2Find the applicable tax bracket
- 3Marginal rate is the percentage for that bracket
Worked Examples
Input
Income: $80k, Tax brackets: 22% for $40.5-$86.3k
Result
Marginal rate: 22%
Next $1 earned taxed at 22%
Common Mistakes to Avoid
- ✕Confusing marginal with effective rate
- ✕Ignoring bracket thresholds
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