What Is Marginal Tax Rate?
The tax rate applied to your last (highest) dollar of income, not your entire income.
Definition
The US uses a progressive income tax: each tier of your income is taxed at a different rate. Your marginal tax rate is the rate on the last dollar earned, the bracket you fall into. People often confuse marginal with effective (average) rate. The marginal rate determines how much tax you save by deducting an expense or contributing pre-tax to a 401(k). 2026 federal brackets: 10%, 12%, 22%, 24%, 32%, 35%, 37%. Your effective rate (total tax / total income) is always lower than your top marginal rate.
Example
Single filer earning $100,000 in 2026: marginal rate = 24%. Effective rate ≈ 17%. A pre-tax 401(k) contribution saves 24 cents per dollar.