One of the most common tax misunderstandings is the belief that moving into a higher bracket taxes all your income at that rate. It doesn't — and the gap between your marginal and effective rates is why.
Marginal rate
Your marginal rate is the bracket your last dollar of taxable income falls into. Federal brackets are progressive, so only the income within each bracket's range is taxed at that bracket's rate. Earning one dollar more than a threshold raises the rate on that dollar — not on everything below it.
Effective rate
Your effective rate is your total tax divided by your total income. Because the lower brackets always tax part of your income at lower rates, your effective rate is meaningfully lower than your marginal rate.
The Tax Bracket Calculator shows both numbers and a bracket-by-bracket breakdown of where your tax actually comes from.
Why it matters
Confusing the two leads to bad decisions — like turning down a raise for fear of "losing money to taxes." That can't happen with progressive brackets: a raise always leaves you with more after-tax income. Use the effective rate to understand your real tax burden, and the marginal rate to evaluate the tax on your next dollar (a bonus, a side gig, a Roth conversion).