Tax Bracket

A Tax Bracket defines the range of income taxed at a specific rate, forming the basis of a progressive tax system.

Understanding Tax Brackets:

• Progressive Taxation: As income increases, it is taxed at higher rates. For example, income up to a certain amount may be taxed at 10%, the next segment at 12%, and so on.

• Marginal vs. Effective Rate: The marginal tax rate applies to the last dollar earned, while the effective tax rate is the average rate paid on total income.

• Bracket Adjustments: Tax brackets are often adjusted annually for inflation to prevent "bracket creep," where inflation pushes taxpayers into higher brackets without real income increases.