How Much Does An Average American Taxpayer Pay?

Farwah Jafri | November 20 2022

As per Self Financial, a financial technology company, Americans pay on average $525,037 each in taxes over a lifetime? Out of which about 65% is the income tax. Sale, property, and auto are other taxes contributing to the average tax rate.

However, $525,037 doesn’t give a definite answer to how much does the average American pay in taxes. To understand this, we need to define the word ‘average.’

Understanding the U.S. Tax System

The United States follows a progressive tax system, and that’s a good thing. Thanks to that, the rich get taxed more and the poor less. So, what’s the factor that tells who pays what? Income!

A progressive tax system factors taxpayers’ wealth or income to define the tax rate. So, there’s no single percentage. An average tax rate is directly proportional to wealth. The more you earn, the more you pay and vice versa.

The U.S. tax system has seven brackets. As of 2021, the tax rate range from 10% to 37%. Some would say add the two, divide, and get the average tax rate. Does it work like that? No!

If you do that, you will get a rate near 24%. Ironically, 24% is one of the seven brackets in the U.S. system. So, is that what you pay a year? Yes, if your income is within $86,376 and $164,925. Else, no!

The 24% rate doesn’t apply to individuals who earn less or more than the range defined above. Let’s say you make $35,000 a year? Would it be just to pay 24% or $8,400 a year? No! That’s why you only pay 12% or $4,200. Here’s the complete breakdown for unmarried taxpayers;


Marginal Tax Rates Income Threshold
10% $0 to $10,275
12% $10,276 to $41,775
22% $41,776 to $89,075
24% $89,076 to $170,050
32% $170,051 to $215,950
35% $215,951 to $539,900
37% $523,901 or more


Source: Internal Revenue Service

Exploring 2022 Average Tax Rate

The U.S. tax system strives to minimize the tax burden. Let’s say an individual makes $15,000 a year. Would he pay 12% tax on the entire sum? No!

The first $10,275 would get taxed at 10%, and the remaining $4,725 would at 12%. So, the tax burden on individual taxpayers gets minimized to an extent. You don’t get taxed more on the entire sum simply because you crossed the threshold by a buck.

Moreover, the tax brackets also vary with marital status. The table above defines the classifications for unmarried taxpayers. Here are the 2022 tax rates for married couples and heads of households;


Marginal Tax Rates Married Couples (Joint Returns) Head of Households
10% $0 to $20,550 $0 to $14,650
12% $20,551 to $83,550 $14,651 to $55,900
22% $83,551 to $178,150 $55,901 to $89,050
24% $178,151 to $340,100 $89,051 to $170,050
32% $340,101 to $431,900 $170,051 to $215,950
35% $431,901 to $647,850 $215,951 to $539,900
37% $647,851 or more $539,901 or more


Source: Internal Revenue Service

What Was the Average American Income in 2020 and 2021?

As the average tax rate depends on annual income, it is a must to know where we stand. Excluding taxes, the average American in 2020 made $84,352 a year as per the US Bureau of Labor Statistics. In 2019, it was $82,852. The year before, $78,635 and $73,573 in 2017. Simply put, the income is on the rise even if it’s not on par with the inflation rate.

What is the Average Tax Rate For the 1%?

As per the Congressional Budget Office, the households in the top 1% of the income table pay about 32% tax a year. Moreover, The Tax Policy Center seconds that estimate as its data show the federal tax rate of around 29.4%.

Does The Average Tax Rate Cover Everything?

As we know, the federal income tax takes accounts for the majority of the returns. However, that isn’t all the tax an average American pays. There’s sales tax, property tax, vehicle tax, and state income tax too. So, how much does the average American pay in taxes? It depends on their yearly purchases and where they live.

During their lifetime, a New Jerseyan would pay on average $931,000 while a West Virginian may pay $321,000 only. The difference is massive!

See Also: Seven Best Tax Tips to Maximize Tax Returns in 2022

Some Tax Forms To Know

To file returns, you need information. Where to get it? Through forms like W-2, 1099, 1099-INT, and others. Here’s a brief overview of three common ones;

  • W-2 Form – This form entails the details of your earned income and the income tax withheld by the employer. Every full-time or part-time employer needs its copy to file returns accurately.
  • 1099 Form – For contractors and freelancers, 1099 is the form you need rather than W-2. It entails the details of your earned income from other sources.
  • 1099-INT – A type of 1099 form especially for individuals who earn dividends from investments or interests from saving accounts.

How To Manage Taxes Smartly?

Managing taxes is no small affair; it is a hassle. However, it is vital to understand the difference between filing returns and managing taxes. The first isn’t hard to do; fill a few blanks and hit send. However, everyone is not a tax expert. The probability of paying more than due is high if you file without advice.

Your best bet is to either learn how the tax code works or assign the duty to an expert who knows the tax code by heart. Remember, there’s not even a definite answer to how much does the average American pay in taxes? Or what’s the average tax rate? So, it is best to leave it to tax experts and file returns smartly!

Author Bio

Farwah is the Product Owner of Monily. She has an MBA from Alliance Manchester Business School, UK. She is passionate about helping businesses overcome challenges that hamper their growth, which is why she is working at Monily to facilitate entrepreneurs to efficiently manage business finances and stay focused on growth.