How do tax brackets work? Think of stair steps

Only the dollars above a bracket line are taxed at the higher rate, never your whole income.

The common mistake

Many people fear that earning one dollar more will push all their income into a higher tax rate. That is not how federal income tax works.

A staircase of rates

Picture a staircase. The first steps of your taxable income are taxed at 10%, the next steps at 12%, then 22%, and so on. Each dollar is taxed at the rate of the step it lands on. In 2026, a single filer pays 10% on the first $12,400 of taxable income, 12% on income from $12,400 to $50,400, and 22% from $50,400 to $105,700.

Taxable income is after deductions

Brackets apply to taxable income, which is what remains after the standard deduction ($16,100 for a single filer in 2026) or itemized deductions. It is Form 1040, line 15.

Why it matters in retirement

Knowing how much room is left in your current step lets you choose how much to take from an IRA or convert to Roth without paying a higher rate.

See your room in the bracket →

Source: IRS Rev. Proc. 2025-32.