The IRS is updating the income thresholds for federal tax brackets to keep up with inflation—an annual tweak that might ease the tax burden for some Americans next year.
These adjustments, usually announced in October or November, are meant to prevent “bracket creep,” a situation where rising prices push taxpayers into higher brackets, making them pay more even if their real income hasn’t increased.
To find your marginal tax bracket, start by identifying your highest level of taxable income.
For example, if a married couple earns $150,000 in gross income, they would subtract the 2026 standard deduction of $32,200, leaving $117,800 in taxable income. That places them in the 22% marginal tax bracket but their effective tax rate is actually much lower, since only a portion of their income is taxed at each rate below that.
will be taxed at 10%, or $2,480 in taxes
Their earnings from $24,800 to $100,800 would be taxed at 12%, or $9,120 in taxes
Their income from $100,800 to $117,800 would be taxed at 22%, or $3,740 in taxes
Combined, they would pay $15,340 in federal income taxes, giving them an effective tax rate of 13%.
Marginal vs Effective Tax — Visual Example
Example: Married couple with $150,000 gross income and a 2026 standard deduction of $32,200.
Gross income: $150,000
Standard deduction (2026): $32,200
Taxable income: $117,800
Total federal tax: $15,340
Effective tax rate: 13%
Only the income within each bracket is taxed at that bracket’s rate. The top rate (22%) applies only to a small slice of income — the rest is taxed at lower rates.
