Finance Maxxing
Income Tax Basics
Marginal Tax Rate
The tax rate on your next dollar of income.
Your marginal rate is the rate applied to the last (highest) dollar of your taxable income. It determines:
- The tax cost of earning additional income
- The tax savings from deductions and pre-tax contributions
Why It Matters
| Action | Impact at 24% Marginal Rate |
|---|---|
| $1,000 additional income | +$240 federal tax |
| $1,000 401(k) contribution | -$240 federal tax |
| $1,000 charitable deduction | -$240 federal tax (if itemizing) |
Combined Marginal Rate
Your true marginal rate includes federal + state + local taxes:
Combined Marginal = Federal Rate + State Rate + Local Rate (+ NIIT if applicable)
For example, a high earner in New York City might face:
- Federal: 37%
- NY State: 10.9%
- NYC: 3.9%
- NIIT: 3.8%
- Combined: 55.6%
Your combined marginal rate is shown on the Dashboard and used throughout the app for after-tax calculations.
Sources
Related Terms
More in Income Tax Basics
Tax Brackets
Progressive rate tiers applied to taxable income.
Effective Tax Rate
Your average tax rate across all income.
Taxable Income
Income remaining after deductions, subject to tax.
Adjusted Gross Income (AGI)
Gross income minus above-the-line deductions.
Modified Adjusted Gross Income (MAGI)
AGI with certain deductions added back, used for eligibility tests.
Filing Status
Determines your bracket thresholds and standard deduction.
Marriage Penalty & Bonus
Tax impact of filing jointly vs. two singles.
Tax Cuts and Jobs Act (TCJA)
2017 law that lowered rates and doubled the standard deduction.