Marginal Tax Bracket

The marginal tax bracket is the range of income that is subject to a specific tax rate, with higher brackets applying to additional income earned. As a trader's total income increases, their marginal rate for short term capital gains rises accordingly.

Understanding one's marginal tax bracket is essential for predicting the exact tax impact of a new trade. This allows investors to evaluate whether the expected profit from a trade justifies the tax cost at their current marginal rate.

It is a fundamental concept for anyone engaged in active financial trading and tax planning.