Abaque · Legislated thresholds

The true marginal rate curve

Your tax bracket is not your marginal rate. Between the Social Security inclusion formula and the Medicare surcharge steps, the rate on your next dollar can be double the bracket printed on the schedule — and it is not monotonic. This sheet draws the real curve and shows every step of the arithmetic behind it.

ReadsMarginal, not average
IncrementΔ = $1,000
Base year2026 (approx.)
Cliffs shownSS · IRMAA
Sheet1 of 1 · Rev A
Caution — dollar figures drift, but not all of them

Re-indexed Moves every January

Adjusted annually for inflation by the IRS or CMS. These defaults are approximate for 2026 and will be wrong next year. Use the index control below to age them forward, or overwrite them directly.

  • Ordinary bracket edges — 10 / 12 / 22 / 24 / 32 / 35 / 37%
  • Standard deduction, plus the extra amount at 65+
  • Contribution limits — 402(g), catch-up, 415(c)
  • IRMAA income thresholds and the surcharge amounts

Frozen Unchanged since 1984

Written into statute as fixed dollar amounts with no inflation indexing at all. They have not moved in four decades, so every year of inflation pulls more retirees into the torpedo. This is the single most under-appreciated fact on this sheet.

  • Provisional income base — $25,000 single, $32,000 joint
  • Second threshold — $34,000 single, $44,000 joint
  • Inclusion rates — 50% and 85%

Drag the index control and watch the torpedo widen: the brackets move, these do not.

Inputs

Set the operating point

Filing status
Household benefit before tax.
0%
Ages the indexed figures forward. Leaves the frozen ones alone — deliberately.
$60,000
Withdrawals, pension and wages. Drives the calculation below.
Household cost of crossing. Estimate — verify with CMS.
True marginal rate
Statutory bracket
Penalty over bracket
Torpedo zone
Fig. 1

Marginal rate on the next dollar of income

Table view — Fig. 1
Calculation

Worked step by step at the cursor

Notes

Which thresholds are cliffs, and which only look like them

Bracket edges are ramps, not cliffs

The most common tax misconception is that crossing into a higher bracket re-taxes all your income at the new rate. It does not. Only the dollars above the edge pay the higher rate. Earning one more dollar can never leave you worse off on brackets alone, and "contribute enough to drop a bracket" saves you the rate difference only on the sliver above the line — usually a trivial sum.

The Social Security torpedo is the real one

Each extra dollar of other income drags up to 85¢ of Social Security into taxable income alongside it. Your taxable income therefore rises by up to $1.85 per $1 earned, and your marginal rate is multiplied by the same factor:

12% bracket × 1.85 = 22.2% true marginal rate 22% bracket × 1.85 = 40.7% true marginal rate

The curve is a hump, not a staircase — the rate rises into the phase-in, peaks, then falls back once 85% of the benefit is already counted and there is nothing left to drag in. That falling section is genuinely counter-intuitive and it is why this curve cannot be read off a bracket table.

IRMAA is a true cliff

The Medicare surcharge is a step function, not a phase-in. One dollar over a threshold costs the full surcharge for the whole year — on the order of a thousand dollars per person, per tier. Two features make it hazardous: it is assessed per person (a couple pays twice), and it runs on a two-year lookback, so your income at 63 sets your premium at 65. Plan Roth conversions around that lookback, not around the year you turn 65.

What this sheet leaves out

  • State income tax — can add or remove several points, and some states exempt Social Security entirely.
  • Capital gains stacking — long-term gains sit on top of ordinary income and have their own 0/15/20% schedule, with a 0% band that creates a valuable harvesting window in low-income years.
  • ACA premium credits — a steep phase-out that dominates everything else for early retirees before Medicare.
  • NIIT — an extra 3.8% on investment income above a MAGI threshold, which is itself frozen and unindexed.
  • The extra standard deduction at 65+, and the separate senior deduction, both of which shift the curve right.

How the curve is computed

The marginal rate is measured numerically rather than derived symbolically, because the cliffs have no derivative:

rate(W) = [ tax(W + Δ) − tax(W) ] / Δ Δ = $1,000

A finite increment means bracket edges appear very slightly rounded rather than perfectly square, and it means a true cliff shows as a tall finite spike instead of an infinity. IRMAA steps are drawn as separate markers rather than folded into the curve, since a one-off charge is not a rate.

This is arithmetic, not advice. Every figure is editable because every figure goes stale — the indexed ones each January, and the frozen ones only when Congress acts. Verify against the current IRS revenue procedure and the CMS premium notice before acting on any dollar amount here. The shape of the curve is the durable part.