Salary FYI

Tax Bracket

Tax

A range of income taxed at a specific rate in a progressive tax system; each bracket has a lower threshold, an upper threshold, and an associated tax rate.

## Tax Bracket

Tax brackets define the ranges of income that are subject to different tax rates in a progressive tax system. They are the building blocks of progressive taxation.

### How Brackets Work

Tax is calculated sequentially: the first bracket's worth of income is taxed at the lowest rate, the next bracket at a higher rate, and so on. Only income within each bracket is taxed at that bracket's rate.

### Number of Brackets by Country

| Country | Brackets | Range |
|---------|----------|-------|
| US | 7 | 10–37% |
| UK | 4 | 0–45% |
| Germany | Continuous formula | 14–45% |
| Japan | 7 | 5–45% |
| Australia | 5 | 0–45% |
| India | 6 (new regime) | 0–30% |

### Bracket Creep

When brackets are not indexed to inflation, taxpayers can be pushed into higher brackets by wage increases that merely keep pace with inflation. Many countries (US, Canada, Australia) index their brackets annually.