Your highest federal tax bracket is not the rate you pay on every dollar you earn. Federal income taxes use marginal brackets, meaning different portions of taxable income face different rates. Filing status, deductions and annual inflation adjustments affect the final calculation.
The relevant rules can depend on age, income, filing status and the type of account or benefit involved. Decisions that look attractive in one tax year may create costs in another. Understanding marginal rates helps prevent costly misunderstandings about raises, bonuses and deductions.
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