Understanding Your Tax Rate

Think your entire income gets taxed at one rate? Not quite. In the US, we use a graduated system, which means different chunks of your paycheck get taxed at different rates.

How Tax Brackets Work

Let's say in 2025, you made $50,000. If you're filing single, here's what happens. Your first $11,925 will be taxed at 10%. Then everything from $11,926 to $48,475 gets taxed at 12%. Finally, that last chunk from $48,476 to $50,000 gets taxed at 22%.

See how you only pay 22% on that last chunk and not your entire paycheck?

Your Effective Tax Rate

If you want to know what percent in total you owe, you want to look at your effective tax rate. This percentage can be calculated by dividing your total tax owed by your total income.

Interesting fact: your effective tax rate will always be less than the top bracket percentage you see for your income.

2025 Federal Tax Brackets

Every year, the government sets these brackets and adjusts them for inflation. Depending on your income level and filing status (married, single, etc.), tax rates can range from 10% to 37%.

Here are the 2025 brackets for single filers:

For married filing jointly, each bracket threshold is roughly doubled.

Final Thoughts

Understanding how tax brackets work is the first step to planning smarter. When your next check comes in - whether it's NIL money, a stipend, or a paycheck - you'll know exactly what the IRS is taking and why. That knowledge puts you in control.

Written by Matthew Park, LRF Intern & Contributor