Marginal Tax Rate

Marginal Tax Rate refers to the rate of tax applied to the last dollar of income earned by an individual or entity. It represents the percentage of tax applied to each additional dollar of income within a specific tax bracket.

For example, if an individual falls into a tax bracket where the marginal tax rate is 24%, this means that for every additional dollar earned, 24 cents will be paid in taxes. The marginal tax rate is crucial for understanding how income tax affects financial decisions, as it indicates the impact of earning more income on overall tax liability.