Lesson 3 of 10

How tax brackets work (with a simple example)

You don't pay one rate on all your money.

Your income is cut into slices. Each slice has its own rate.

First, the standard deduction comes off the top. In 2026 that's $16,100 for a single person. You pay no income tax on it.

Then the slices start.

Example: $50,000 salary, single

First $16,100: standard deduction$0

Next $12,400 taxed at 10%$1,240

Next $21,500 taxed at 12%$2,580

Total federal income tax$3,820

The top rate is 12%, but the tax is only 7.6% of the whole salary.

Key idea

Moving into a higher bracket only taxes the extra dollars at the higher rate. A raise never lowers your take-home pay because of brackets.