Ryan VaughnCOO of Incite Tax & Accounting. Ask me anything about your taxes.

How Tax Brackets Work | Incite Tax

4 Mar 2025 · 1 min

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In this concise explainer, Ryan Vaughn demystifies U.S. tax brackets by describing the progressive tax system. He emphasizes that income is taxed in separate portions, each subject to its own marginal rate, rather than a single flat rate applied to all earnings. Using a $50,000 annual income example, he shows how portions are taxed at 10%, 12%, etc., and clarifies the common misunderstanding that being "in the 22% tax bracket" means the entire income is taxed at 22%; instead, only the income falling within that bracket’s range is taxed at that rate. The goal is to help viewers understand how tax brackets affect their wallet.

Chapters

What even is a tax bracket? Let's break it down so you understand exactly how tax brackets work, and more importantly, how they affect your wallet. In the US, we have a progressive tax system, which means the more you make, the higher the percentage of your income gets taxed. But, and this is important, you're not taxed one flat rate. Instead, your income is divided into chunks, and each chunk is taxed at a different rate. For example, let's say you make $50,000 a year. You don't just get taxed at one single rate for all of it. Instead, part of your income is taxed at 10%, another part at 12%, and so on. So when you hear someone say, I'm in the 22% tax bracket, that doesn't mean all their income is being taxed at 22%, just the portion that falls into that bracket.