Tax Bracket: What Does It Mean?

A tax bracket is a range of income that is taxed at a specific rate under a progressive tax system. In the U.S., the federal tax system currently has seven brackets: 10%, 12%, 22%, 24%, 32%, 35%, and 37%. A common misconception is that being in a higher bracket means all of your income is taxed at that rate — in reality, only the income that falls within each bracket's range is taxed at that rate. Understanding how tax brackets work helps you make smarter decisions about income, deductions, and tax planning strategies.