Federal Tax Rates by the Numbers: Exactly How Irs Marginal Brackets Calculate Your Taxes
By Alexander Ross
The tax bracket cliff myth often causes workers to make counterproductive financial decisions. Financial planners frequently encounter clients who consider rejecting promotions or declining overtime hours to avoid reaching a higher tax tier. The numbers prove that doing so leaves guaranteed earnings on the table.
Take an employee whose 2023 taxable income stood at $44,725, the exact top of the 12 percent bracket for single filers. Suppose their employer offers a $5,000 year-end performance raise, bringing taxable income to $49,725. Under the cliff myth, some might assume the entire $49,725 is now taxed at 22 percent, creating a $10,939.50 bill and wiping out the raise.
Under statutory IRS rules, the baseline $44,725 incurs the exact same $5,147 in tax it generated before. Only the new $5,000 enters the 22 percent bracket, producing $1,100 in tax. After federal taxes, the employee keeps $3,900 of the raise. Earning more money always increases total net pay.
Alexander Ross has covered the video game industry for a decade, writing deep dives on game design, esports tournaments, VR developments, and gaming culture.
