Marginal Tax Rate
Financial term in the Tax category
Definition
The tax rate applied to your last dollar of income. In the US progressive tax system, different portions of income are taxed at different rates.
Related Terms
Tax Bracket
The range of income subject to a certain income tax rate in the progressive US tax system. Higher income levels are taxed at higher rates (marginal tax rates).
Effective Tax Rate
The average rate at which your total income is taxed, calculated by dividing total tax paid by total taxable income. It is always lower than your marginal tax rate because the US uses a progressive tax system.
Frequently Asked Questions
What is Marginal Tax Rate?
The tax rate applied to your last dollar of income. In the US progressive tax system, different portions of income are taxed at different rates.
Why is Marginal Tax Rate important in personal finance?
Marginal Tax Rate is an important tax concept that helps individuals make better financial decisions. Understanding Marginal Tax Rate can improve your financial planning and help you achieve your money goals.
How does Marginal Tax Rate relate to Tax Bracket?
Marginal Tax Rate and Tax Bracket are related financial concepts. The range of income subject to a certain income tax rate in the progressive US tax system. Higher income levels are taxed at higher rates (marginal tax rates).
More Tax Terms
View all Tax termsGet Personalized Advice
Ask Warren AI how Marginal Tax Rate applies to your specific financial situation.
Try Warren Free