Most of the government's federal income tax revenue comes from the nation's top income earners. In 2021, the top 5% of earners — people with incomes $252,840 and above — collectively paid over $1.4 trillion in income taxes, or about 66% of the national total.
Those in the top 1 percent will pay a little over a third of their income in taxes this year on average, those in the middle will pay about 26 percent, while those among the poorest fifth of Americans will pay about 17 percent of their income in taxes on average.
Reported Income Rose and Taxes Paid Fell in Tax Year 2022
The average individual income tax rate inched down from 14.9 percent in 2021 to 14.5 percent in 2022. Because the Office of Management and Budget (OMB) classifies the refundable part of tax credits as spending, the IRS does not include it in tax share figures.
What does impact your finances are federal tax brackets and there are seven of them. The lowest tax bracket is 10%. The highest tax bracket is 37%. If you're in the middle class, you're probably in the 22%, 24% or possibly 32% tax brackets.
Altogether, the top 50% of filers earned 90% of all income and were responsible for 98% of all income taxes paid in 2021. The other half of earners, those with incomes below $46,637, collectively paid 2.3% of all income taxes in 2021.
The average income tax rate in 2021 was 14.9 percent. The top 1 percent of taxpayers paid a 25.9 percent average rate, nearly eight times higher than the 3.3 percent average rate paid by the bottom half of taxpayers.
Elon Musk to pay record-breaking $12 billion tax bill. CNBC's Robert Frank reports on Elon Musk's tax bill which is the largest in history. Musk will pay a total of $12 billion for 2021.
When it comes to income tax, state tax rates vary. Some are on the higher side. In fact, the states with the highest tax in the U.S. in 2021 are: California (13.3%)
The middle class is commonly defined as households earning between two-thirds and double the median income, which is $128,151 in the San Francisco-Oakland-Berkeley, California metro area, the Census Bureau reports. That means middle class households there earn between $85,434 and $256,302 a year.
The amount of tax withheld from your pay depends on what you earn each pay period. It also depends on what information you gave your employer on Form W-4 when you started working. This information, like your filing status, can affect the tax rate used to calculate your withholding.
The Pew Research Center defines the middle class as households that earn between two-thirds and double the median U.S. household income, which was $80,610 in 2023, according to the U.S. Census Bureau. 22 Using Pew's yardstick, middle income is made up of people who make between $43,350 and $130,000.
You generally don't have to pay taxes if your income is less than the standard deduction or the total of your itemized deductions, if you have a certain number of dependents, if you work abroad and are below the required thresholds, or if you're a qualifying non-profit organization.
The two biggest taxes Americans pay each year are to the federal government in Washington—federal individual income taxes, and the payroll taxes that are deducted from paychecks to fund Social Security and Medicare. At the federal level, the highest effective tax rates are paid by those between 45 and 54.
The top 1% of earners typically pay much more in taxes than many other Americans. Nationwide, this group contributes 45% of total personal income taxes collected. However, the top 1% doesn't pay the same amount everywhere. Therefore, some states may be more dependent on this group than others for tax revenue.
In some years, billionaires such as Jeff Bezos, Elon Musk and George Soros paid no federal income taxes at all. Billionaires avoid these taxes by taking out special ultra-low-interest loans available only to them and using their assets as collateral.
As of Jan 4, 2025, the average annual pay for an After Tax in the United States is $58,389 a year. Just in case you need a simple salary calculator, that works out to be approximately $28.07 an hour. This is the equivalent of $1,122/week or $4,865/month.
Overall, the median lifetime earnings for all workers are $1.7 million, which is just under $42,000 per year ($20 per hour). Over a 40-year career, those who didn't earn a high school diploma or GED are expected to bring in less than $1 million, which translates into slightly more than $24,000 a year ($11.70 per hour).
Roughly 14 percent of the budget provides assistance to families and individuals in need. This includes refundable tax credits, Supplemental Security Income, Supplemental Nutritional Assistance Program (SNAP), low-income housing and school meals.
“On the other hand, the middle class primarily earns through wages, which are subject to higher income tax rates,” Feniak said. The IRS taxes long-term capital gains on a graduated scale that maxes out at 20%. That means even the richest households can pay no more than one dollar in five on their capital gains.
California has the highest individual income tax burden, while seven states (including Texas, Florida, and Washington) have the lowest. Washington has the highest sales and excise tax burden, while New Hampshire has the lowest. Red states have a lower tax burden than blue states, on average.