Understanding Tax Brackets: A Complete Guide
8 min
What Are Tax Brackets?
Tax brackets are ranges of income taxed at specific rates. In a progressive system, you pay multiple rates on different portions of your income — not a single rate on everything. This is the most common system across US states.
Progressive vs Flat Tax
Progressive systems (California, New York) use multiple brackets where higher income is taxed at higher rates. Flat tax systems (Colorado, Illinois) apply one rate to all taxable income. Nine states have no income tax at all.
Marginal vs Effective Rate
Your marginal rate is the tax on your last dollar earned. Your effective rate is your total tax divided by income — always lower than your marginal rate in a progressive system.
How Brackets Are Adjusted
Many states index brackets for inflation annually. For 2026, most bracket thresholds increased by approximately 3-4% compared to 2025.
Tip
Tax laws vary by state and change frequently. Use our calculators for the most up-to-date rates and estimates for your specific situation.
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