Tax brackets, with our fictional friends Tom and Tina

Tax brackets are bands of income defined by the tax code for which there is a tax on income in the band at a predetermined rate. For example, Tom and Tina, a married couple who file their taxes together (for which they operate under the “married filing jointly” status) who are experienced neurosurgeons at a great hospital who make $925,000 each—for a total income of $1.85 million—this would be their tax breakdown. For simplicity, even though this almost certainly wouldn’t give them their biggest advantage, let’s assume they take the standard deduction and nothing else (not even retirement contributions), which for married couples filing jointly, in 2023 is $24,800.

Then the first $24,800 they made is tax-free, and they’ll pay taxes on the rest, namely $1,825,200

 You only pay taxes at the rate of the band on the income that falls inside the band, so this hypothetical couple’s federal taxes would have looked something like this in 2020:

Gross income	$ 1,850,000.00
Standard Deduction	$      24,800.00
Taxable Income	$ 1,825,200.00
Bracket Start	Bracket End	Bracket Percentage	Tax on income within the bracket
$                             0.00	$      19,750.00	10%	$                   1,975.00
$                19,750.01	$      80,250.00	12%	$                   7,260.00
$                80,250.01	$    171,050.00	22%	$                 19,976.00
$             171,050.01	$    326,600.00	24%	$                 37,332.00
$             326,600.01	$    414,700.00	32%	$                 28,192.00
$             414,700.01	$    622,050.00	35%	$                 72,572.50
$             622,050.01	$ 1,825,200.00	37%	$               445,165.50
Total Tax			$               612,472.98
Effective Tax Rate			33.107%

It is important to note that the last bracket has no upper limit, so the surgeons would have paid 37% on their income above $622,050.01, whatever the upper limit of that income was.

The surgeons, if they’re financially savvy, didn’t, in fact, pay more than $610,000 in federal income taxes; they probably gave to charity, had dependent children or parents to take care of, were still paying interest on medical school loans, and had a lot of other ways, totally legitimately, to lower their tax liability by tax credits and tax deductions—which would take the place of the standard deduction given here for simplicity— which they claimed on their returns.