Your marginal rate is the tax on your next dollar. Your effective rate is the tax on your whole income. They're almost never the same — and confusing them leads to genuinely bad money decisions.
A stack of buckets
Both the US and Canada use a progressive system. Picture your income poured into a stack of buckets. The first bucket is taxed at the lowest rate; only the overflow into the next bucket is taxed at the next rate, and so on. No single dollar is ever taxed more than once, and reaching a higher bracket only affects the dollars in that bracket.
Marginal rate
Your marginal rate is the rate on the top bucket your income reaches. If a US single filer's last dollars fall in the 22% bracket, their marginal rate is 22%. This is the number that matters for decisions at the margin: "If I earn $1,000 more, how much do I keep?" or "If I deduct $1,000, how much do I save?"
Effective rate
Your effective rate is total tax divided by total income — the true average. Because most of your income was taxed in the lower buckets, this is always lower than your marginal rate. A US single filer earning $80,000 might have a 22% marginal rate but an effective rate closer to 12%.
Which number to use when
| Question | Use this rate |
|---|---|
| Should I make this deductible contribution? | Marginal |
| Is a side gig worth it after tax? | Marginal |
| What share of my pay goes to tax overall? | Effective |
| Comparing total tax burden between years | Effective |
See both for your income
Our income tax calculators show your marginal and effective rates side by side, with the full bracket-by-bracket breakdown.
This article is general information, not financial, tax, or medical advice. See our disclaimer.