How to Calculate Marginal Tax Rate

Marginal tax rate is the highest percentage income tax rate you pay on any of your income.
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The federal government and some state governments levy progressive income taxes. This means that as your income rises, the additional money you make is taxed at progressively higher rates. The last dollar you make is taxed at the highest rate, which is called your marginal tax rate. Calculating a marginal tax rate is mostly a matter of figuring out your taxable income.

Taxable Income and Tax Rates

The marginal tax rate for federal income tax depends on your taxable income. To figure taxable income, add up all of your wages, tips, and other compensation from work. Include self-employment earnings plus interest and dividend income. The total is your gross income. Subtract deductions from gross income to calculate taxable income. Look in a table of federal income tax rates to determine your marginal tax rate. Suppose your taxable income in 2013 worked out to $80,000 and you filed a joint return. Income between $72,500 and $146,400 was taxed at a 25 percent rate, so 25 percent is the marginal rate for federal income tax. If your state imposes an income tax, calculate the marginal rate the same way.