Why it matters
The marginal rate helps a client understand the tax effect of a raise, a bonus, a deduction or an additional retirement contribution. It is not the same as the effective rate on the whole return.
Example
A client is in the 22 percent marginal bracket. An additional $1,000 of taxable income is generally taxed at 22 percent, while the effective rate on the entire return may be lower because the earlier income was taxed at lower rates.
Related terms
Questions about Marginal tax rate
Is the marginal tax rate the same as the tax bracket?
The bracket is the range of income, and the marginal rate is the rate applied within that range. A taxpayer can have income in more than one bracket.
Does a bonus get taxed at the marginal rate?
A bonus is part of taxable wages and can increase the tax at the margin, but the withholding method may not match the final rate. The return reconciles the difference.