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How Federal Income Tax Brackets Work. Say a married couple, filing jointly, in 2016, had a taxable income of $175,000. Each dollar over $151,900âor $23,100âwould fall into the 28% federal income tax bracket. However, the couples' total federal tax would have been $35,986âjust about 20%, of their adjusted gross income.
You might think you pay a high income tax rate when you consider only your federal income tax bracket. However, your overall, or effective, tax rate is typically lower. This rate measures your total tax as a percentage of your total income. Your tax bracket represents your marginal tax rate, which is the rate you pay on only the top portion of your income. Other parts of your income are taxed at lower rates.