What Are Tax Brackets?

Tax brackets are income ranges taxed at different rates — the U.S. uses a progressive system, meaning higher income is taxed at higher rates. But only the income in each bracket gets taxed at that rate, not your entire income. For example, if you're in the 22% bracket, you don't pay 22% on everything — just on the income that falls within that range. Your marginal rate is your top bracket rate, while your effective rate is what you actually pay on average. Understanding brackets helps you make smarter decisions about tax planning.