Marginal Tax Rate
Definition of 'Marginal Tax Rate'
The marginal tax rate is different for each income level. The federal government has a progressive tax system, which means that the tax rate increases as your income increases. The marginal tax rate for the 2023 tax year is as follows:
* 10% for taxable income up to $9,950
* 12% for taxable income from $9,951 to $40,525
* 22% for taxable income from $40,526 to $85,525
* 24% for taxable income from $85,526 to $163,300
* 32% for taxable income from $163,301 to $208,850
* 35% for taxable income from $208,851 to $523,600
* 37% for taxable income over $523,600
In addition to the federal income tax, you may also have to pay state income tax. The marginal tax rate for state income tax varies from state to state.
The marginal tax rate is important to know because it can affect your financial planning. For example, if you are considering making a large purchase, you will want to make sure that you will have enough money to pay the taxes on it. You may also want to consider contributing to a retirement savings plan, which can help you reduce your taxable income and lower your marginal tax rate.
The marginal tax rate is also used to calculate the amount of money that you will receive in a tax refund. If you have overpaid your taxes, you will receive a refund for the amount that you overpaid. The amount of your refund will depend on your marginal tax rate.
The marginal tax rate is a complex topic, and there are many factors that can affect it. If you have any questions about your marginal tax rate, you should consult with a tax professional.
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