Finance glossary
Marginal Tax Rate
Definition
The tax rate applied to your next dollar of income.
The marginal tax rate is the percentage paid on the last dollar earned, set by the top bracket your income reaches. Because the U.S. uses progressive brackets, only income within each band is taxed at that band rate, so earning more never lowers total take-home pay.
In a sentence
Earning a raise pushed part of his income into a 24% marginal tax rate.
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