If you pay taxes, do you know what tax bracket you’re in?
It’s kind of a trick question, actually, since most of us don’t pay taxes according to one tax bracket. (Popular misconception.)
But it’s a good time to ask yourself about it, since the IRS just announced the new inflation-adjusted tax brackets for 2026), putting a finer point on the tax rates that were extended by the One Big Beautiful Bill Act (OBBBA) in July.
In short, the OBBBA renewed the same seven federal income tax rates we’ve had since 2018, and now we know exactly how much taxable income will fall within each rate, aka each tax bracket. (The IRS raises the income limits to reflect annual cost-of-living increases so no one is pushed into a higher tax bracket by inflation.)
Now before you review the table below, there’s an important caveat related to that trick question: When you look up which bracket your taxable income falls into, the corresponding tax rate isn’t the tax rate you pay on all your income. These are the marginal tax rates for each income range, meaning that tax rate only applies to the portion of your income that’s not taxed at lower rates. The withholding from your paycheck reflects this, estimating your average (aka effective or blended) tax rate. How exactly does it all work? Here’s a quick example.
| Tax Rate |
Tax Year 2025 Bracket |
Tax Year 2026 Bracket |
| 10% |
$11,925 or less ($23,850 for married couples filing jointly) |
$12,400 or less ($24,800 for married couples filing jointly) |
| 12% |
Over $11,925 ($23,850) |
Over $12,400 ($24,800) |
| 22% |
Over $48,475 ($96,950) |
Over $50,400 ($100,800) |
| 24% |
Over $103,350 ($206,700) |
Over $105,700 ($211,400) |
| 32% |
Over $197,300 ($394,600) |
Over $201,775 ($403,550) |
| 35% |
Over $250,525 ($501,050) |
Over $256,225 ($512,450) |
| 37% |
Over $626,350 ($751,600) |
Over $640,600 ($768,700) |
Marginal tax rate vs. effective tax rate
The U.S. has what’s known as a progressive tax system, meaning your income isn’t taxed at one rate. Instead, you pay tax in layers known as brackets. As your income goes up and crosses the various thresholds, the tax rate on each layer of income rises.
Let’s say you’re married and you and your spouse are filing together with $100,000 in taxable income in 2026. (This means the two of you make more than $100,000 a year together, of course, since we’re only talking taxable income — after your tax deductions, any 401(k) contributions, etc.)
The $100,000 puts you in the 22% bracket, because, as the table above shows, you make over $96,950 but less than $206,700. That means you only owe 22% on income over $96,950. In other words:
• The first $23,850 is taxed at 10% = $2,385
• The next $73,100 ($96,950 – $23,850) is taxed at 12% = $8,772
• And then the remaining $3,050 ($100,000 – $96,950) is taxed at 22% = $671
In total, you and your spouse owe $11,828. ($2,385+$8,772+$671)
This is where your average tax rate comes in. That’s the percentage of all your income you pay in taxes. So in this example, since you two owe $11,828 of the $100,000, your effective tax rate would be 11.8%.
So what?
No one wants to pay more tax than they have to. And many Americans don’t fully understand how tax brackets and rates work. But the more you know, the better equipped you are to maximize your take-home pay and capitalize on tax-advantaged savings accounts, deductions, and tax credits.
Besides extending the current federal tax rates beyond 2025, the OBBBA included a number of new tax breaks and rule changes, several of which take effect this year. (These include tax deductions for tips and auto loan interest, and a higher SALT cap, among others.)
So even before 2026, understanding how your tax burden could change can help you decide what to do if you end up with more cash in your pocket. (Important note: The IRS’s tax withholding estimator has yet to reflect the OBBBA changes that take effect this year.) Talk it over with a financial advisor — at SoFi, there’s no charge for an initial financial planning session — or consider these ideas:
• Bump up your automatic deposits into your emergency savings account
• Pay down high-interest credit card debt
• Increase your contributions to your investment accounts (or open one)
• Start a new savings account earmarked for something fun
Related Reading
• 2026 Tax Calculator: How the One Big Beautiful Bill Act’s Tax Changes Will Affect You (Tax Foundation)
• Don’t Underestimate the Power of Your W-4 (SoFi)
• Top 8 Year-End Tax Tips (TurboTax)
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Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
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