Taxes

What Is a Marginal Tax Rate?

A marginal tax rate is the rate of tax applied to the next unit of income, which is the rate of the highest tax bracket a person's taxable income reaches. It shows how much of an additional amount of income would go to tax, and it is usually higher than the effective tax rate.

Marginal vs. Effective Rate

The marginal rate applies only to the last slice of income. The effective rate is total tax divided by total income, blending every bracket together.

Example

Someone whose taxable income reaches the 22% bracket has a 22% marginal rate: an extra 1,000 of income would add about 220 in federal income tax. Their effective rate could be closer to 12%–15%, because lower portions of their income are taxed at lower rates.

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🔗 Related Terms

Effective Tax Rate Tax Bracket Taxable Income

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Last updated: September 27, 2026. This definition is for general educational purposes only. It is not financial, investment, tax, legal, or medical advice, and it does not recommend any product or course of action. For decisions about your own situation, consult a qualified professional.