Marginal vs. Average

IMAGINE YOU’RE SINGLE, you claim the standard deduction and you have income of $65,000 in 2025. You’d be in the 22% federal income tax bracket, but that isn’t how much of your income you’d lose to taxes.

On the first $15,000 of income, you wouldn’t owe any federal income taxes, thanks to your standard deduction. The next $11,925 would be taxed at 10% and the subsequent $36,550 would be taxed at 12%. That gets you up to $63,475 in total income. It’s only at that point that your income starts getting taxed at 22%. In other words, while you’re in the 22% marginal federal income tax bracket, just $1,525 of your $65,000 income would be taxed at that rate. Your total federal income tax bill would be $5,914, putting your average tax rate at 9.1% for your $65,000 in gross income and 11.8% for your $50,000 in taxable income.

Your marginal tax rate is crucial for figuring out whether you should buy taxable or tax-free bonds, how much all that mortgage interest is costing you, and whether it makes sense to convert your traditional IRA to a Roth IRA. But your marginal rate isn’t a good indicator of what your total bill will be for the year. For that, you’d want to know your average rate.

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Article: Life on the Margins