How much does the average American pay in taxes annually?
Combining direct and indirect taxes, as well as taxes from state and local government, the average American family paid $17,902 in taxes in 2021.
| Location | Average Taxes ▾ | Compared to National Average |
|---|---|---|
| United States | $13,367 | |
| District of Columbia | $23,745 | +$10,377 |
| Connecticut | $20,551 | +$7,184 |
| Massachusetts | $19,228 | +$5,861 |
The U.S. currently has seven federal income tax brackets, with rates of 10%, 12%, 22%, 24%, 32%, 35% and 37%. If you're one of the lucky few to earn enough to fall into the 37% bracket, that doesn't mean that the entirety of your taxable income will be subject to a 37% tax. Instead, 37% is your top marginal tax rate.
The average fee for preparing Form 1040 with Schedule A to itemize personal deductions, and a state income tax return, was a flat fee of $323. The average fee for Form 1040 with the standard deduction, plus a state income tax return, was $220.
Middle-Class Income Doesn't Matter as Much as Tax Brackets
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. That may sound as if you're paying 22%, 24% or 32% of your income toward taxes, but you're actually not.
High-Income Taxpayers Paid the Majority of Federal Income Taxes. In 2021, the bottom half of taxpayers earned 10.4 percent of total AGI and paid 2.3 percent of all federal individual income taxes. The top 1 percent earned 26.3 percent of total AGI and paid 45.8 percent of all federal income taxes.
The long-troubled west African country Ivory Coast has the highest income tax rate in the world.
If your personal or financial circ*mstances have changed, you may end up owing taxes to the IRS when you usually get a refund. Common reasons include underpaying quarterly taxes if you're self-employed or not updating your withholding as a W-2 employee.
Different income tax brackets apply depending on how much money you make. Generally speaking, a higher percentage is typically taken out of your paycheck if you earn a higher level of income.
Some Americans might be exempt from filing income taxes because they don't meet the income requirements to file, or they're being claimed as a dependent.
How much do you usually owe in taxes?
| Tax rate | Single filers | Married filing jointly |
|---|---|---|
| 10% | $0 to $11,000 | $0 to $22,000 |
| 12% | $11,001 to $44,725 | $22,001 to $89,450 |
| 22% | $44,726 to $95,375 | $89,451 to $190,750 |
| 24% | $95,376 to $182,100 | $190,751 to $364,200 |
2024 tax brackets (for taxes filed in 2025)
In 2024, the top tax rate of 37% applies to those earning over $609,350 for individual single filers, up from $578,125 last year.
But most people don't. According to the IRS, nearly 90% of U.S. taxpayers pay a professional or use software to file. There are situations where that's a no-brainer — if you own a business or have complicated investments, for instance. But for many taxpayers, that's not the case.
One recent study, for instance, found that income taxes take, on average, nearly 10 percent of family earnings from high earners in the Golden State, but just 1.2 percent from middle-income residents.
Upper middle class: Anyone with earnings in the 60th to 80th percentile would be considered upper middle class. Those in the upper middle class have incomes between $89,745 and $149,131. Upper class: Finally, the upper class is the top 20% of earners and they have incomes of $149,132 or higher.
In 2018, the national middle-income range was about $48,500 to $145,500 annually for a household of three. Lower-income households had incomes less than $48,500 and upper-income households had incomes greater than $145,500 (incomes in 2018 dollars).
For example, white Americans are 83 percent of total taxpayers, and the percentage of zero-tax filers who are white is 79 percent. African Americans are roughly 13 percent of total taxpayers and 17 percent of zero-tax filers. Asian Americans comprise 3.6 percent of total taxpayers and 3.4 percent of zero-tax filers.
Texas pays an exorbitant $17B in excise taxes to the federal government – more than any other state by far and more than the income taxes on Texas's top 1% of earners.
- Invest in Municipal Bonds. ...
- Shoot for Long-Term Capital Gains. ...
- Start a Business. ...
- Max Out Retirement Accounts and Employee Benefits. ...
- Use a Health Savings Account (HSA) ...
- Claim Tax Credits.
South Dakota
South Dakota is considered to be very tax-friendly towards retirees. There is no state income tax in South Dakota. This means that there is no state income tax on Social Security benefits, distributions from retirement accounts such as IRAs or 401(k)s, or pension benefits from public or private pensions.
What state has the lowest taxes?
States with the lightest tax burden:
Alaska: 5.06% Delaware: 6.12% New Hampshire: 6.14% Tennessee: 6.22%
Alaska had the lowest average overall tax burden – measured as total individual taxes paid divided by total personal income – at 5.4%, followed by Tennessee (6.3%), New Hampshire (6.4%), Wyoming (6.6%) and Florida (6.7%).
Claiming 1 on your tax return reduces withholdings with each paycheck, which means you make more money on a week-to-week basis. When you claim 0 allowances, the IRS withholds more money each paycheck but you get a larger tax return.
“The best strategy is breaking even, owing the IRS an amount you can easily pay, or getting a small refund,” Clare J. Fazackerley, CPA, CFP, told Finance Buzz. “You don't want to owe more than $1,000 because you'll have an underpayment penalty of 5% interest, which is more than you can make investing the money.
The most common reason why taxpayers end up owing money to the IRS is because they did not have enough money taken out of their paychecks throughout the year, according to tax experts. When employees first start a job, they fill out a W-4 form, which determines how much money is withheld from their paychecks for taxes.
