Top 1% Share of Federal Income Tax: Rates, Trends, and 2026 Changes

The top 1 percent of taxpayers paid about 38.4 percent of all federal individual income taxes in 2023, the most recent year of IRS data. That is nearly double their 20.6 percent share of national adjusted gross income, and it sits well above the 33.2 percent share the same group paid two decades earlier, though below the pandemic-era peak of 45.8 percent in 2021.¹

That single figure gets cited constantly in tax debates, often without the context that makes sense of it. The rest of this article works through what the number includes, how it has moved, who is in the group, and what it leaves out.

The Share at Each Rung

Concentration sharpens as you climb the income ladder. In 2023:

The top 1 percent paid 38.4 percent of federal individual income tax.
The top 5 percent paid 59.3 percent.
The top 10 percent paid 70.5 percent.
The bottom 50 percent paid 3.3 percent.

Dollar totals tell the same story. In 2022, the last year with published totals, the top 1 percent paid roughly $864 billion in federal income tax. The entire bottom 90 percent paid about $599 billion combined.²

How the Share Has Changed Over Time

In 2001, the top 1 percent paid about 33.2 percent of federal income tax. By 2023 that share was 38.4 percent. The trajectory has been generally upward, driven largely by income concentration: as a larger portion of total earnings flows to top filers, the progressive rate structure mechanically produces a larger share of total tax from them.¹

The 2020 and 2021 tax years stand out. Pandemic-era policies, stimulus spending, and unusually strong financial markets pushed the top 1 percent’s share to 42.3 percent in 2020 and 45.8 percent in 2021. That peak reflected surging capital gains realizations along with an income mix that briefly tilted further toward the top. By 2022 and 2023, the share drifted back toward the longer trend as those distortions faded.

The trend does not mean statutory tax rates on high earners went up. What changed is where the income landed.

Who Counts as the Top 1 Percent

To make the top 1 percent for the 2023 tax year, a filer needed adjusted gross income of at least $675,602. That figure slipped from the 2021 peak of $682,577 and is well above the 2020 threshold of $548,336.¹

The measure is adjusted gross income, meaning income actually reported on a return after certain adjustments.³ That matters because the threshold reflects taxable economic activity, not wealth. A billionaire whose stock quietly appreciates without a sale may report far less AGI than a professional who cashed out $700,000 in options. The threshold also shifts with markets, since high earners draw income from a mix of wages, business distributions, and investment gains, all of which fluctuate more than a typical salary.

Average Federal Income Tax Rates by Group

The top 1 percent paid an average federal income tax rate of about 26.3 percent in 2023. Out of every dollar of AGI they reported, roughly 26 cents went to federal income tax. The top 5 percent averaged 23.0 percent, and the top 10 percent 20.9 percent. The bottom 50 percent averaged 3.7 percent, with many filers in that group owing nothing after the standard deduction and refundable credits like the Earned Income Tax Credit.¹⁴

Between the 37 percent top statutory bracket and the 26.3 percent effective rate sits a gap of more than ten points. Two features of the tax code explain most of it.

Graduated Brackets

Federal income tax is layered. Even a filer with millions in taxable income pays 10 percent on the first slice, 12 percent on the next, and so on up to 37 percent on income above $640,600 (single) or $768,700 (married filing jointly) for 2026.⁵ Only the top slice hits 37 percent, so the blended rate is always lower.

The Capital Gains Rate

Profits from assets held longer than a year are taxed at 0, 15, or 20 percent instead of ordinary rates. For 2026, the 20 percent rate applies at taxable income above $545,500 (single) or $613,700 (joint).⁶⁷ Capital gains make up a large share of top-1-percent income, and this preferential rate is the single biggest reason their effective rate sits well below 37 percent.

High earners also face the 3.8 percent Net Investment Income Tax on investment income above $200,000 (single) or $250,000 (joint). Those thresholds have never been indexed for inflation since the tax took effect in 2013, so they catch more filers each year.⁸ Combined, investment income for top earners is often taxed at 23.8 percent.

What the 38.4 Percent Figure Does Not Include

The share applies to federal individual income tax only. That is the most progressive piece of the federal tax system, and it is also just one piece.

Payroll taxes work very differently. Social Security tax is a flat 6.2 percent on wages up to an annual cap ($176,100 in 2025), with earnings above the cap not taxed at all. Medicare tax is a flat 1.45 percent on all wages, with no cap. Relative to total income, lower and middle earners pay a larger share toward payroll taxes than top earners do. When payroll taxes, excise taxes, and the corporate income tax are folded in, the top 1 percent’s share of total federal taxes drops well below its 38.4 percent share of income taxes alone.

There is a second blind spot. AGI counts income only when it is realized. A CEO holding $500 million in company stock that gained $100 million in value this year reports none of that gain on a return until the shares are sold. Research from the Congressional Research Service has found that unrealized capital gains for the wealthiest Americans can represent roughly 60 percent of their total economic income in a given year.⁹ The IRS income-share figures therefore understate how much economic income flows to the top and, correspondingly, overstate effective tax rates against true economic gains.

Neither point makes the income tax data wrong. It means the 38.4 percent figure answers one question, not every question, about who pays for the federal government.

What Changes for 2026

The seven individual income tax rates from the 2017 Tax Cuts and Jobs Act were set to expire at the end of 2025. The One Big Beautiful Bill Act, signed on July 4, 2025, made them permanent.⁵ For 2026, the brackets remain 10, 12, 22, 24, 32, 35, and 37 percent, with inflation-adjusted thresholds.

Because the rate structure did not change, the forces shaping the top 1 percent’s share of federal income tax should stay the same: income concentration, capital gains realizations, and the gap between ordinary and investment tax rates. If concentration holds near current levels, the share should stay in the high-30s to low-40s range that has defined the past several years.

1
Tax Foundation. Summary of the Latest Federal Income Tax Data, Tax Year 2023
2
Tax Foundation. Summary of the Latest Federal Income Tax Data, 2025 Update
3
Internal Revenue Service. Definition of Adjusted Gross Income
4
Internal Revenue Service. Earned Income Tax Credit
5
Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026
6
Tax Foundation. 2026 Tax Brackets and Federal Income Tax Rates
7
Internal Revenue Service. Topic no. 409, Capital Gains and Losses
8
Internal Revenue Service. Questions and Answers on the Net Investment Income Tax
9
Congress.gov. Capital Gains Taxes: An Overview of the Issues