How Much Does the Average American Pay in Taxes?
The most recent IRS data from 2018 filings reveals that Americans paid an average of $15,322 in federal income taxes. Since that figure includes the tax returns of wealthy outliers, including about 22,000 people who earned more than $10 million, it’s more than what most Americans typically pay each year. But it also doesn’t include things like Social Security and Medicare, state income tax, property tax, or sales tax. Getting a clear picture of the typical American’s tax burden requires more than just an average dollar amount.
How Taxation Works
Federal tax rates increase with taxable income. Each income bracket is taxed at a different rate ranging from 10 to 37 percent, as follows:
- 10 percent for incomes less than $9,875
- 12 percent for incomes between $9,875 and $40,125
- 22 percent for incomes between $40,125 and $85,525
- 24 percent for incomes between $85,525 and $163,300
- 32 percent for incomes between $163,300 and $207,350
- 35 percent for incomes between $207,350 and $518,400
- 37 percent for incomes greater than $518,400
For married couples filing jointly, the tax brackets are twice as large. For example, married couples earning less than $19,750 are taxed at the 10 percent rate. Capital gains and dividends are taxed according to a different schedule. All of these rates are for taxable income, which means they’re only levied on income above the standard deduction, which is $12,400 for individuals, $18,650 for head of households, and $24,800 for married couples filing jointly.
This doesn’t mean that the wealthiest Americans are paying 37 percent of their income in taxes. They only pay 37 percent of the income they earn above $518,400. Similarly, an individual earning $50,000 per year won’t pay 22 percent income tax on that amount. They’ll pay nothing on the first $12,400, 10 percent on the next $9,875, and 12 percent on the rest.
Employees and employers also each pay 6.2 percent of their net earnings up to $137,700 towards Social Security, while self-employed people pay 12.4 percent. For Medicare, it’s 1.45 percent for the employee and employer, or 2.9 percent for self-employed people.
If you would like to learn more about federal and state income taxes, please consult a professional tax advisor.
What Americans Paid by Income Level
Americans generally pay more in taxes as their adjusted gross income (AGI) increases. This figure includes all earnings, capital gains, taxable retirement distributions, and business income. It is also adjusted by any deductions or contributions that reduce taxable income. Here’s what the average American paid in 2018, based on AGI.
|AGI||Average Income Tax Paid||Share of Returns|
|$1 to $5,000||$134||6%|
|$5,000 to $10,000||$237||6.5%|
|$10,000 to $15,000||$153||7.5%|
|$15,000 to $20,000||$491||6.6%|
|$20,000 to $25,000||$994||6.2%|
|$25,000 to $30,000||$1,369||5.8%|
|$30,000 to $40,000||$2,057||10%|
|$40,000 to $50,000||$2,859||7.8%|
|$50,000 to $75,000||$4,688||14%|
|$75,000 to $100,000||$7,390||8.9%|
|$100,000 to $200,000||$15,277||13.8%|
|$200,000 to $500,000||$47,559||4.5%|
|$500,000 to $1 million||$156,431||0.7%|
|$1 million to $1.5 million||$313,160||0.2%|
|$1.5 million to $2 million||$464,253||0.06%|
|$2 million to $5 million||$816,360||0.09%|
|$5 million to $10 million||$1,872,196||0.02%|
|$10 million or more||$7,386,572||0.01%|
Though only the top 0.01 percent of Americans took home $10 million or more, they paid enough in taxes to skew the average high. The most common AGI bracket was between $50,000 and $75,000, accounting for 14 percent of returns. For those Americans, the average tax payment was $4,688.
Where the Money Goes
The federal government gets a lot of money from American taxpayers each year, so where does it all go? The majority of spending goes to these three categories:
- Social Security: 23 percent of the budget in 2019 went to providing monthly retirement benefits to 45 million retirees. 3 million spouses and children of retired workers, 6 million spouses and children of deceased workers, and 10 million disabled workers and their dependents also received benefits.
- Medicare, Medicaid, CHIP, and market subsidies: About a quarter of the budget went to these health insurance programs. The largest share went to Medicare, which provides health insurance to about 61 million Americans who are older than 65 or have disabilities.
- Security and Defense: 16 percent of the budget paid for international activities related to security and defense. Most of this money funded the Defense Department.
Less than one fifth of the budget goes to these other two categories:
- Safety Net Programs: About 8 percent of the budget went towards that provide other types of aid, such as the Supplemental Nutrition Assistance Program (SNAP), the Earned Income Tax Credit and Child Tax Credit, school meals, low-income housing assistance, and various other programs.
- Interest: About 8 percent of the budget goes towards interest payments on federal debt.
A small percentage of the budget also goes towards benefits for federal retirees and veterans, transportation infrastructure, education, science and medical research, international affairs, and other costs.