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I know a lot of y’all immediately went to March Madness when you saw that headline.
Totally understandable. The bracketology associated with the annual NCAA college basketball tournament match-ups has become an obsession for many. This year, the tourney drew its largest opening-day audience — 9.8 million viewers — across multiple TV networks, according to Front Office Sports.
Then there are tax brackets. That’s what millions of filers focus on, at least for brief while, instead of hoops as they search for the answer to the question, “what is my tax bracket?”
It’s a legitimate taxpayer question. But the answer won’t answer the real tax filing query: “How much tax do I owe?”
That answer requires a closer look at our progressive tax system and how the tax brackets come into play in determining your final, usually lower overall effective tax rate.
Tax brackets overview: It’s easy to find your tax bracket. A search of the Internal Revenue Service’s website will direct you to IRS.gov’s tax rates and brackets page.
Then there’s the rest of the online tax community. We cover the annual changes, thanks to inflation, that the IRS makes in the fall to the brackets (like my post on the 2026 increases).
The brackets and their annual adjustments show what portion of your earnings fall into the current seven tax rates. As your income goes up, the tax rate on the next layer of income is higher.
Below is a table showing the 2025 tax year income tax brackets, which are what apply to the returns due to the IRS by this April 15.
| 2025 INDIVIDUAL TAX RATES AND INCOME BRACKETS Use these tax rates and income brackets when completing 2025 tax returns filed in 2026. | ||||
| Tax Rate | Single | Head of Household | Married Filing Jointly or Surviving Spouse | Married Filing Separately |
| 10% | Up to $11,925 | Up to $17,000 | Up to $23,850 | Up to $11,925 |
| 12% | $11,926 to $48,475 | $17,001 to $64,850 | $23,851 to $96,950 | $11,926 to $48,475 |
| 22% | $48,476 to $103,350 | $64,851 to $103,350 | $96,951 to $206,700 | $48,476 to $103,350 |
| 24% | $103,351 to $197,300 | $103,351 to $197,300 | $206,701 to $394,600 | $103,351 to $197,300 |
| 32% | $197,301 to $250,525 | $197,301 to $250,500 | $394,601 to $501,050 | $197,301 to $250,525 |
| 35% | $250,526 to $626,350 | $250,501 to $626,350 | $501,051 to $751,600 | $250,526 to $375,800 |
| 37% | $626,351 or more | $626,351 or more | $751,601 or more | $375,801 or more |
However, that bracket into which the last dollar you make falls doesn’t give you the true and final tax rate that you pay. It simply gives you a broad-brush look at where you stand, earnings-wise, among your taxpaying peers.
Instead, your eventual tax bill is based on your effective tax rate.
“I’m in the 24% bracket.” Or not: When people look at the tax bracket income ranges, they typically find the one into which their annual income falls and claim that as their tax bracket.
For example, if your 2025 salary as a single taxpayer was $110,000 (good for you!), you might declare that you’re in the 24 percent tax bracket. Technically, you are correct, since that tax bracket covers gross income ranging from $103,351 to $197,300.
But what matters at final tax calculation time is your effective tax bracket. As the name indicates, it’s the lower tax rate you really, effectively pay.
This tax percentage generally is lower thanks to the type of income you earn, tax deductions that lower your gross income to a more tolerable taxable level, tax credits that reduce your Treasury bill dollar-for-dollar, and the U.S. tax system’s progressive structure.
Basically, your effective tax rate is the average rate of tax on all the dollars you make, not just the last ones that kicked you into a higher marginal tax bracket.
Progressive tax system math: A progressive tax system helps ensure that when your income jumps to a higher tax bracket, you don’t pay that new higher rate on all your earnings.
You pay the higher marginal rate only on the part that’s in the new tax bracket. The real-world result is that you’ll be able to make more money without your tax bill growing so much.
Here’s an example of how the progressive tax rates work using a using a single taxpayer — let’s call her Kathy — as a simplified example using the $110,000 income in the 24 percent tax bracket mentioned earlier.
If Kathy truly paid a 24 percent tax on her total $110,000 annual income earned in 2025, she’d owe Uncle Sam $26,400. Yikes!
Here’s where the progressive tax system works to her (and all our) advantage.
Kathy’s first chunk of earnings is taxed at the 10 percent rate bracket, with the next amount taxed at 12 percent, then the next falling into the 22 percent tax bracket, and the final earnings ending up in the top marginal 24 percent tax bracket.
Here’s a breakout of the tax dollars and amount of tax on each (numbers rounded).
10% tax on $11,925 = $1,193
12% tax on $36,549 = $4,386
22% tax on $54,874 = $12,072
24% tax on $6,652 = $1,596
That adds up to a total tax of $19,247 or $7,153 less than if Kathy’s total income was taxed at her 24 percent marginal tax rate.
Plus, the smallest amount of her earnings — $6,652 — actually falls into her top 24 percent marginal tax bracket.
The final tax math puts Kathy’s effective tax rate at just under 17.50 percent. That’s much more favorable than the 24 percent that is her tax bracket’s marginal rate.
Again, this calculation for Kathy’s 2025 tax bill is a basic, for-illustration-purposes-only example. The ol’ blog’s tax-savvy readers have already realized it doesn’t take into account the previously mentioned tax breaks that Kathy can claim to reduce her ultimate tax bill.
But the example’s rough numbers give you an idea of how you can’t use the basic annual tax brackets to determine your annual tax liability. Unless you want to pay more in taxes than you should.
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