--- title: Progressive Tax Definition description: Progressive tax is a tax structure in which the tax rate increases as the amount of taxable income increases. image: https://www.realized1031.com/hubfs/social-suggested-images/Realized_Glossary_Graphic-4.jpg --- [![Realized 1031 Exchange Marketplace](https://www.realized1031.com/hs-fs/hubfs/Images/Brand/Logo/Realized/Realized-Logo-Black.png?width=240&height=80&name=Realized-Logo-Black.png "Realized 1031 Logo") ](https://www.realized1031.com/) - Better Business Bureau Rating: **A+** - [FINRA BrokerCheck](https://brokercheck.finra.org/firm/summary/22333) - [Call](tel:1-877-797-1031) **(877) 797-1031** # Progressive Tax A tax structure in which the tax rate increases as the amount of [taxable income](https://www.realized1031.com/glossary/taxable-income) increases. “Progressive” due to the nature of the tax rate progressing from low to high, the net effect is that higher-earning individuals are taxed more heavily than lower-earning ones. In this structure, a taxpayer’s average tax rate is less than the person’s marginal tax rate. For example, say Sarah reports $50,000 of taxable income on her tax return. Assuming she is filing as an individual, Sarah’s marginal federal income tax bracket will be 22%. Due to federal income tax being progressive in nature, however, Sarah will calculate her tax liability as so: | Tax Rate | Taxable Income Bracket | Tax Owed | | --- | --- | --- | | 10% | $0 to $9,525 | 10% of taxable income | | 12% | $9,526 to $38,700 | $952.50 plus 12% of the amount over $9,525 | | 22% | $38,701 to $82,500 | $4,453.50 plus 22% of the amount over $38,700 | Once adding up the tax liability from each bracket, Sarah’s federal income tax liability will be $6,939.50. 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In this structure, a taxpayer’s average tax rate is less than the person’s marginal tax rate. For example, say Sarah reports $50,000 of taxable income on her tax return. Assuming she is filing as an individual, Sarah’s marginal federal income tax bracket will be 22%. Due to federal income tax being progressive in nature, however, Sarah will calculate her tax liability as so: Tax Rate Taxable Income Bracket Tax Owed 10% $0 to $9,525 10% of taxable income 12% $9,526 to $38,700 $952.50 plus 12% of the amount over $9,525 22% $38,701 to $82,500 $4,453.50 plus 22% of the amount over $38,700 Once adding up the tax liability from each bracket, Sarah’s federal income tax liability will be $6,939.50. 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