US federal income tax: a 2025–2026 guide
Brackets and the standard deduction, marginal vs effective rates, FICA, retirement accounts, capital gains and the OBBBA changes.
US federal income tax runs on progressive brackets, a standard deduction most people take, and a separate layer of payroll tax. The 2025 One Big Beautiful Bill Act (OBBBA) made the previous rate schedule permanent and added several changes. This is the plain-English overview for the 2025 return (filed in 2026) and the 2026 year.
How the brackets work
There are seven rates — 10, 12, 22, 24, 32, 35 and 37%— and they're marginal: only the income within each band is taxed at that band's rate. Your marginal rate is the band your last dollar falls in; your effective rate is the total tax divided by income, always lower.
| Rate | Taxable income up to |
|---|---|
| 10% | $12,400 |
| 12% | $50,400 |
| 22% | $105,700 |
| 24% | $201,775 |
| 32% | $256,225 |
| 35% | $640,600 |
| 37% | above $640,600 |
Married-filing-jointly bands are roughly double, with the 37% rate starting at $768,700 for 2026. A single filer with $60,000 of taxable income in 2025 pays about $8,100 — a marginal rate of 22% but an effective rate of only about 13.5%.
The standard deduction
Most filers subtract a fixed standard deduction rather than itemizing. OBBBA raised it and made the increase permanent:
You itemize only when your deductible expenses (mortgage interest, state and local taxes, charitable gifts) beat the standard deduction. OBBBA also added a temporary $6,000 bonus deduction for taxpayers 65+ (2025–2028, income-limited) and raised the SALT cap — see below.
FICA and self-employment tax
On top of income tax, wages carry payroll tax:
| Tax | Rate | Wage cap |
|---|---|---|
| Social Security (each side) | 6.2% | $184,500 |
| Medicare (each side) | 1.45% | No cap |
| Additional Medicare | 0.9% | Over $200k / $250k |
The self-employed pay both halves as self-employment tax of 15.3% on 92.35% of net profit — but half of it is deductible against income tax. On $100,000 of net profit that's about $14,130 of SE tax, with roughly $7,065 deducted above the line.
Retirement accounts
Tax-advantaged accounts are the backbone of US saving:
- 401(k): $24,500 elective deferral in 2026, plus an $8,000 catch-up at 50+, and a $11,250 “super catch-up” at ages 60–63.
- IRA: $7,500 in 2026 ($8,600 with the 50+ catch-up). Roth = no deduction now, tax-free later; Traditional = deduct now, taxed later.
- HSA: $4,400 self / $8,750 family in 2026 — the only account with a triple tax advantage.
Capital gains and investment income
Assets held over a year get preferential long-term rates of 0%, 15% or 20%; held a year or less, gains are taxed as ordinary income. Qualified dividends get the same favorable rates. High earners also pay the 3.8% Net Investment Income Tax above $200k single / $250k joint — making the top federal rate on long-term gains 23.8%.
Quarterly estimated taxes
Income without withholding — self-employment, investments — generally needs quarterly estimated payments on Form 1040-ES (mid-April, June, September and the following January). Avoid the underpayment penalty by paying the least of 90% of this year's tax or 100% of last year's (110% if your prior-year income was over $150,000).
State income tax
Most states add their own income tax on top of federal. Nine charge no broad income tax— Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming — while California's top rate reaches 13.3%. The trend since 2021 has been toward flatter, lower state rates. State income or sales tax plus property tax is deductible federally only if you itemize, under the SALT cap.
What the OBBBA changed
- Made the 10–37% rate schedule and the higher standard deduction permanent.
- Raised the SALT cap to $40,000 (2025–2029, phasing down for high earners, reverting to $10,000 in 2030).
- Permanently raised the Child Tax Credit to $2,200 per child.
- Added temporary breaks (a senior bonus deduction, and limited relief on tips and overtime) that sunset after 2028 — always check whether a provision is permanent or temporary.
Sources & further reading
This guide is general information, not personal tax advice, and reflects the rules we believe to apply as at June 2026 — rates and thresholds change. Always check your own figures against the IRS and consider a qualified adviser before acting. You remain responsible for the accuracy of anything you file.
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Start freeFrequently asked questions
What are the US federal income tax brackets?
There are seven rates — 10, 12, 22, 24, 32, 35 and 37% — applied marginally, so only the income within each band is taxed at that band’s rate. The thresholds are adjusted for inflation each year.
What is the difference between marginal and effective tax rate?
Your marginal rate is the rate on your last dollar of income; your effective rate is total tax divided by total income, which is always lower because the lower bands are taxed less.
What is the standard deduction?
A flat amount most filers subtract from income instead of itemising. The 2017 increase was made permanent by the One Big Beautiful Bill Act, and the figure is inflation-adjusted annually.
Do I have to pay quarterly estimated taxes?
If you have income without withholding — self-employment, investments — yes. Four payments sized to the safe harbor (100%, or 110% if your AGI was over $150,000, of last year’s tax) avoid an underpayment penalty.