Tax2 min read · Updated October 21, 2026
Marginal vs effective tax rate: what you really pay
The difference between marginal and effective tax rates, with a 2026 example, and why a raise never lowers your take-home pay.
The two rates
The marginal rate is the rate on the last slice of your income. The effective rate is the share of all your income that goes to tax. The effective rate is always lower.
What a raise does
If a raise moves you into a higher bracket, only the part above the line is taxed at the higher rate. Take-home always rises.
Using your marginal rate
Your marginal rate is the one to use when deciding about pre-tax savings. Each $1,000 into a traditional 401(k) saves $220 of federal tax at 22%.
What this leaves out
State income tax, Social Security and Medicare are separate. Use the paycheck calculator for the full picture.
Common questions
What is a marginal tax rate?
The rate you pay on your next dollar of taxable income.
What is an effective tax rate?
Total tax divided by total income.
Can a raise reduce my take-home?
No. Only the extra income is taxed more.