Tax brackets are income ranges taxed at progressively higher rates. You only pay the higher rate on income within that bracket — not on your entire income. The U.S. currently has seven federal income tax rates.
Tax brackets define income ranges, each taxed at a specific rate. The U.S. federal income tax system is progressive — the more you earn, the higher the rate applies to each additional dollar, but only to dollars within that bracket.
Your top bracket is your *marginal rate* — not a flat rate on everything you earn. If your income crosses into a higher bracket, only the portion above the threshold gets taxed at the higher rate. Income below that threshold is still taxed at the lower rate.
Being 'in the 22% bracket' doesn't mean you pay 22% on every dollar. You pay 10% on the first slice of income, 12% on the next, and 22% only on income within the 22% range. The blended result — your effective rate — is typically much lower than your marginal rate.
When you apply for business financing, lenders look at taxable income reported on your tax returns — not gross revenue. Understanding how brackets affect your net income clarifies what your returns will show. Consult a tax professional about your specific situation.