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Marginal Tax Bracket

Every individual is taxed according to their income, determined by the Marginal Tax Bracket created by the government. Income to a given value is always taxed at the marginal tax rate stated in the bracket. In 2009, up to $8,350 is taxed at 10%. From $8,351 to $33,950 is taxed at 15%. This means that if an individual earns $10,000 per year, the first $8,350 will be taxed at 10%, and the remaining $1,650 will be taxed at the higher rate of 15%. Even if the individual's income increased to $200,000, the first $8,350 would be taxed at 10%. So, often when increases in income occur, increases in taxes also occur. However, these increases only apply to the income that is above the limit of the previous tax rate.

Fast Facts

  • Tax rates vary on the status of the individual (married, single, head of household)
  • There are different rates for married couples filing jointly or filing separately.

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