Americans pay, on average, somewhere between a quarter and a third of their income in combined federal, state, and local taxes, and the average US tax rate by income level rises sharply as you move up the earnings ladder. Households in the bottom fifth pay about 17% of income to all taxes combined. Middle-income households pay roughly 26%. The top 1% pays slightly more than a third. Federal taxes alone averaged about 17.4% across all households in 2021, the most recent year the Congressional Budget Office has published, though that figure reflected pandemic-era credits that have since expired.1Congressional Budget Office. The Distribution of Household Income in 2021
Average Total Tax Rate by Income Group
The clearest picture comes from adding federal income tax, payroll taxes, and state and local taxes together. Research from the Institute on Taxation and Economic Policy puts the recent averages at roughly:
- Bottom 20% of earners: about 17% of income. This group often owes little or no federal income tax, and refundable credits can push the federal portion into negative territory, but sales taxes, payroll taxes, and property taxes still take a meaningful bite.
- Middle-income earners: about 26% of income. For this group, payroll taxes and state-level consumption taxes often exceed the federal income tax bill.
- Top 1% of earners: slightly more than a third of income. Federal income tax makes up the largest share, though the Social Security wage cap (set at $184,500 for 2026) limits payroll tax as a percentage of their earnings.
The federal income tax by itself is steeply progressive. Once you fold in state and local taxes, especially sales and property taxes, the overall system is still progressive but less so than the federal brackets alone would suggest.
Why Payroll Taxes Change the Picture at Lower Incomes
For workers below the middle of the distribution, payroll taxes usually matter more than federal income tax. Employees pay 6.2% of wages toward Social Security and 1.45% toward Medicare, for a combined 7.65%, and the employer matches that amount.2Office of the Law Revision Counsel. 26 USC Ch. 21 – Federal Insurance Contributions Act Economists generally treat the employer share as part of your compensation cost, which means the real payroll tax wedge on wages is closer to 15.3%.
Self-employed workers see this directly: they owe both halves, for a combined self-employment tax of 15.3% (12.4% Social Security plus 2.9% Medicare), and can deduct half of that when calculating adjusted gross income.3Internal Revenue Service. Self-Employment Tax (Social Security and Medicare Taxes)
Payroll taxes apply from the first dollar of earnings. There is no standard deduction, no bracket structure, and no credits to soften the impact. Social Security stops applying above $184,500 in 2026, which is why the payroll tax share of income actually falls at the very top; Medicare’s 1.45% has no cap.4Internal Revenue Service. Topic No. 751, Social Security and Medicare Withholding Rates
Why the Top Bracket Isn’t Your Rate
Federal income tax uses seven marginal brackets that run from 10% to 37% for 2026.5Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026 Only the income that falls inside a given bracket is taxed at that bracket’s rate. A single filer earning $60,000 pays 10% on the first $12,400 of taxable income, 12% on the portion up to $50,400, and 22% only on the amount above that. The effective federal income tax rate lands well below the 22% top bracket.
Two more mechanics pull the effective rate down. The standard deduction removes a slice of income from tax entirely: $16,100 for single filers, $32,200 for joint filers, and $24,150 for heads of household in 2026.5Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026 Then credits cut the resulting bill dollar for dollar. The Child Tax Credit is worth up to $2,200 per qualifying child under 18 for 2026, with up to $1,700 of that refundable.6Internal Revenue Service. Child Tax Credit The Earned Income Tax Credit can exceed $8,000 for a working family with three or more qualifying children.7Internal Revenue Service. Earned Income Tax Credit (EITC) Because refundable credits can exceed the tax owed, many lower-income households have a negative effective federal income tax rate.
How State and Local Taxes Change the Answer
Federal figures tell only part of the story. State income tax rates run from 0% in the eight states with no income tax to as high as 13.3% at the top of the range. Some states use a flat rate; others use graduated brackets. Combined state and local sales tax rates run from 0% to more than 9.5%. Property taxes fund local schools and services, and effective rates vary widely across the country.
States without an income tax often lean harder on sales and property taxes, so the overall burden in a “low-tax” state can end up close to what residents pay elsewhere. The composition matters for how progressive the system is at ground level: sales and property taxes typically consume a larger share of income for lower earners, which is why the bottom fifth still hands over roughly 17% of income even when their federal income tax is zero or negative.
Extra Federal Taxes at the High End
Households at the top face a few layers most taxpayers never see, and those layers are the reason the top 1% averages above a third of income in combined taxes even with the Social Security cap in play.
An additional 0.9% Medicare tax applies to wages and self-employment income above $200,000 for single filers, $250,000 for joint filers, and $125,000 for married individuals filing separately. Employers do not match this charge.8Internal Revenue Service. Topic No. 560, Additional Medicare Tax
A separate 3.8% net investment income tax applies to interest, dividends, capital gains, rental income, and royalties for individuals whose modified adjusted gross income exceeds $200,000 (single) or $250,000 (joint). The tax runs on the lesser of net investment income or the amount by which MAGI exceeds the threshold, and the thresholds are not adjusted for inflation.9Office of the Law Revision Counsel. 26 U.S. Code 1411 – Imposition of Tax
Long-term capital gains and qualified dividends run on a separate rate schedule of 0%, 15%, and 20%.10Office of the Law Revision Counsel. 26 U.S. Code 1 – Tax Imposed For 2026, a single filer pays 0% on long-term gains up to $49,450 of taxable income, 15% up to $545,500, and 20% above that; joint filers get 0% up to $98,900, 15% up to $613,700, and 20% beyond. Stacking the 3.8% investment income tax on top pushes the federal rate on investment income as high as 23.8%. That gap between wage rates and investment rates is why two households with the same total income can end up at very different effective rates: a top earner living on wages will pay more than a top earner living on long-held investments.