What does the term 'tax bracket' refer to?

The term 'tax bracket' refers to the range of income that is taxed at a specific rate. In many tax systems, income is divided into segments, with each segment being taxed at different rates. For example, if the taxable income falls within a certain range, it will be subjected to a particular percentage tax rate. This structure allows for a progressive tax system, where individuals with higher incomes pay a larger percentage of their income in taxes compared to those with lower incomes. Understanding tax brackets is essential for estimating tax liability and for strategizing taxable income to potentially lower tax owed.