contextual menus on drupal
If you mean literally only show that level, you can do this with Menu Block module using the Make the starting level follow the active menu item option.

If you mean that only that level should be expanded, you can do it like this: go to edit your Taxonomy Menu vocabulary. Under Taxonomy menu -> Structure options, uncheck Auto expand menu items.

But I'm not sure if Taxonomy Menu can be used with Menu Block like this.