Tax Bracket

A tax bracket is a range of income that is taxed at a specific rate. The U.S. tax system is progressive, meaning as your income increases, only the income within each bracket is taxed at its corresponding rate. For example, the first $10,000 might be taxed at 10%, the amount from $10,001 to $40,000 at 12%, and so on. This ensures that higher earners pay a higher percentage of their income in taxes, but only on the income within each bracket, not the entire amount. Tax brackets help structure how income is taxed fairly based on earning levels.