How Much Do US Citizens Pay in Taxes on Average?

Unfortunately, there is no simple answer to this question. Our country has a progressive tax system. As of 2021, tax brackets range from 10% to 37% and there are 7 such brackets, so you can say the average tax rate is around 24.57%. So now you may be wondering, is this the average tax Americans pay?

Not exactly. As an example, a single taxpayer earning $86,376 in one year would pay that 24% “average” rate on only $1 of income in 2021. That’s because he or she will only pay the dollar over the $86,375 ceiling for the 22% tax bracket. 

Are you still with me?

So the 24% bracket is only applicable for those earning an income between $86,376 – $164,925,. Here’s the tax bracket breakdown for unmarried individuals as of 2021.

Tax Rate Income Threshold

  • 10% $0 – $9,950
  • 12% $9,951 – $40,525
  • 22% $40,526 – $86,375 
  • 24% $86,376 – $164,925
  • 32% $164,926 – $209,425
  • 35% $209,426 – $523,600
  • 37% $523,601 and above

These thresholds are slightly higher compared to 2020 as they’re tweaked every year to keep up with inflation. The federal income tax brackets for 2022 will range from 10% to 37%, which will span $0 to $10,275 for single filers at the lowest marginal rate to $539,000 or more at the highest rate.

That said, it might be better to determine median tax of American instead of trying to determine the average tax. Put simply, the median tax pertains to the rate that falls right in the middle.  In 2018, the top 50% of American taxpayers paid 97.1% of all federal income taxes, while the bottom 50% paid approximately 2.9%.

Based on data from the Tax Foundation, the average tax rate is 14.6%  for the top 50% of taxpayers; the bottom 50% is 3.4% which gives us the average rate at 13.3% overall.

But you can also look at it another way. Medicare and Social Security also take a percentage of our earnings so these should be considered when trying to determine the average tax. 

The Tax Wedge

The tax wedge pertains to the ratio between what the average individual pays in taxes and what he or she would have earned pre-tax. The Organisation for Economic Co-Operation and Development (OECD) annually computes tax wedges for the U.S. as well as other countries. 

Calculations include both income taxes and FICA taxes—Medicare, Social Security and the Additional Medicare tax. 

Both the employers’ and the employees’ shares of Medicare and Social Security are used to compute the OECD tax wedge. Social Security tax rate is set at 6.2% for wages paid in 2021 and this is applicable to both the employer and employee, while for those who are self employed, it is 12.4%. The Medicare tax on the other hand takes 1.45% for employers and employees, while for the self-employed it’s 2.9%.

Figuring out how much tax you should be paying can be quite complicated. To help you in filing your taxes, you may want to consider engaging the services of a professional such as TaxSlayer to make sure you are paying no more than what is required.

Category: Tax Tips

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