The federal government collects six main types of taxes: individual income taxes, payroll taxes, corporate income taxes, excise taxes, estate and gift taxes, and customs duties. Individual income tax brings in the most revenue, followed by payroll taxes that fund Social Security and Medicare. Each category has its own base, its own rates, and its own rules about who pays.
Individual Income Tax
The individual income tax is the federal government’s largest revenue source, and it uses a progressive structure: the more taxable income you earn, the higher the rate on each additional dollar.1Office of the Law Revision Counsel. 26 USC 1 – Tax Imposed Seven bracket rates run from 10% to 37%, and the One Big Beautiful Bill Act signed in mid-2025 made those rates permanent rather than letting them expire at the end of 2025.
For tax year 2026, single filers hit each bracket at these thresholds:
- 10% on taxable income up to $12,400
- 12% from $12,401 to $50,400
- 22% from $50,401 to $105,700
- 24% from $105,701 to $201,775
- 32% from $201,776 to $256,225
- 35% from $256,226 to $640,600
- 37% above $640,600
Married couples filing jointly get roughly double those thresholds, topping out at the 37% rate above $768,700.2Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026 The brackets apply to wages, salaries, freelance income, interest, dividends, and most other earnings.
Standard Deduction
Before the bracket math kicks in, most taxpayers reduce their gross income by claiming the standard deduction. For 2026, the amounts are $16,100 for single filers, $32,200 for married couples filing jointly, and $24,150 for heads of household.2Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026 You can instead itemize deductions for things like mortgage interest and charitable donations, but itemizing only makes sense when those individual deductions exceed the standard amount.
Capital Gains
Profits from selling investments or property held longer than a year get taxed at preferential long-term capital gains rates rather than the ordinary income brackets. For 2026, the three tiers are:
- 0% on taxable income up to $49,450 (single) or $98,900 (married filing jointly)
- 15% on income above those thresholds up to $545,500 (single) or $613,700 (joint)
- 20% on income above those levels
Short-term gains on assets held one year or less are taxed at your ordinary income rates.2Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026
Alternative Minimum Tax and Net Investment Income Tax
Two additional income taxes catch higher earners who might otherwise reduce their bill significantly. The Alternative Minimum Tax recalculates your liability under a parallel set of rules that disallow certain deductions. For 2026, the AMT exemption is $90,100 for single filers and $140,200 for married couples filing jointly, phasing out at $500,000 and $1,000,000 respectively.2Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026 If your income stays below those exemption levels, AMT won’t apply to you.
The Net Investment Income Tax adds a flat 3.8% on investment income like interest, dividends, capital gains, and rental income for individuals whose modified adjusted gross income exceeds $200,000 (single) or $250,000 (married filing jointly). Those thresholds are not adjusted for inflation.3Internal Revenue Service. Questions and Answers on the Net Investment Income Tax
Payroll Taxes
Payroll taxes are the second-largest source of federal revenue, and they fund Social Security and Medicare rather than going into general spending. Under the Federal Insurance Contributions Act, both you and your employer each pay 6.2% of your wages toward Social Security and 1.45% toward Medicare.4Office of the Law Revision Counsel. 26 USC Ch. 21 – Federal Insurance Contributions Act The combined employee-side withholding of 7.65% shows up on every paycheck.
The Social Security tax only applies to earnings up to a wage base that adjusts annually. For 2026, that cap is $184,500. Earnings above that amount are not subject to the 6.2% Social Security tax.5Social Security Administration. 2026 Cost-of-Living Adjustment (COLA) Fact Sheet Medicare has no wage cap, and high earners pay an Additional Medicare Tax of 0.9% on wages exceeding $200,000 for single filers or $250,000 for joint filers.6Internal Revenue Service. Topic No. 560, Additional Medicare Tax That surcharge falls entirely on the employee.
Self-Employment Tax
If you work for yourself, you pay both sides. The Self-Employment Contributions Act sets the rate at 12.4% for Social Security (up to the $184,500 wage base) and 2.9% for Medicare, a combined 15.3%.7Office of the Law Revision Counsel. 26 USC Chapter 2 – Tax on Self-Employment Income You can deduct the employer-equivalent half when calculating adjusted gross income, which softens the blow. The 0.9% Additional Medicare Tax applies to self-employment income above the same thresholds as wage earners.6Internal Revenue Service. Topic No. 560, Additional Medicare Tax
Federal Unemployment Tax
Employers also pay the Federal Unemployment Tax, which funds the federal side of the unemployment insurance system. The statutory rate is 6.0% on the first $7,000 of wages paid to each employee per year.8Office of the Law Revision Counsel. 26 USC 3301 – Rate of Tax Employers who pay into their state unemployment fund on time receive a credit of up to 5.4%, dropping the effective federal rate to just 0.6% per employee.9Internal Revenue Service. Topic No. 759, Form 940 – Employers Annual Federal Unemployment (FUTA) Tax Return Only employers pay FUTA; it’s never withheld from an employee’s paycheck.
Corporate Income Tax
Corporations pay a flat 21% on net income, which is total revenue minus allowable business expenses like salaries, rent, equipment, and depreciation.10Office of the Law Revision Counsel. 26 USC 11 – Tax Imposed The rate applies to domestic C corporations and certain foreign corporations operating in the United States.
Corporations expecting to owe $500 or more for the year must make quarterly estimated payments rather than waiting until filing time.11Internal Revenue Service. Estimated Taxes Businesses organized as S corporations, partnerships, or sole proprietorships generally don’t pay corporate tax at all. Their income passes through to the owners’ individual returns and gets taxed at personal rates.
Excise Taxes
Excise taxes are levied on specific products and activities rather than on income. You rarely see them broken out on a receipt because they’re typically built into the price by the manufacturer or distributor.
The federal excise tax on gasoline is 18.4 cents per gallon (18.3 cents plus a 0.1-cent surcharge for the Leaking Underground Storage Tank Trust Fund). Diesel carries a higher rate of 24.4 cents per gallon.12Office of the Law Revision Counsel. 26 U.S. Code 4081 – Imposition of Tax Those fuel taxes flow into the Highway Trust Fund, which pays for road and bridge projects. Other major excise taxes hit tobacco, alcoholic beverages, airline tickets, indoor tanning services, and certain health-related items. The airline ticket excise tax funds the Airport and Airway Trust Fund that keeps air traffic control running.
Estate and Gift Taxes
The federal government taxes large transfers of wealth whether they happen at death or during someone’s lifetime. The estate tax applies to a deceased person’s taxable estate, and the gift tax applies to significant transfers made while the donor is alive.13Office of the Law Revision Counsel. 26 USC 2001 – Imposition and Rate of Tax14Office of the Law Revision Counsel. 26 USC 2501 – Imposition of Tax Both share a unified credit structure, and the top rate on amounts above the exemption is 40%.
For 2026, the basic exclusion amount is $15,000,000 per individual, a significant increase enacted by the One Big Beautiful Bill Act. A married couple can effectively shield up to $30 million in combined wealth through portability. Separately, you can give up to $19,000 per recipient per year without it counting toward your lifetime exclusion at all.15Internal Revenue Service. What’s New – Estate and Gift Tax Because of these thresholds, fewer than 1% of estates ever owe federal estate tax.
Customs Duties
Customs duties are taxes on goods imported into the United States from foreign countries. U.S. Customs and Border Protection collects these charges at ports of entry, and the rates vary depending on what the product is and where it was manufactured.16eCFR. 19 CFR 24.1 – Collection of Customs Duties, Taxes, Fees, Interest, and Other Charges Product classification follows a detailed schedule called the Harmonized Tariff Schedule, with rates ranging from zero on some goods to well over 25% on others.
Beyond generating revenue, customs duties serve as a trade policy tool. The government can raise tariffs to discourage imports of particular goods, protect domestic industries, or respond to trade practices by other countries. Importers pay the duties directly, and the costs typically get passed to consumers through higher retail prices.
Filing Deadlines and Penalties
Individual returns for the prior year are due on April 15. If that date falls on a weekend or holiday, the deadline shifts to the next business day.17Internal Revenue Service. IRS Opens 2026 Filing Season You can request an automatic six-month extension by filing Form 4868, but that only extends the time to file, not the time to pay. Any tax owed is still due by the original April deadline.18Internal Revenue Service. About Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return
Missing the filing deadline triggers a failure-to-file penalty of 5% of the unpaid tax for each month the return is late, up to a maximum of 25%.19Internal Revenue Service. Failure to File Penalty Separately, if you file but don’t pay the full amount, a failure-to-pay penalty of 0.5% per month applies to the unpaid balance, also capped at 25%. Setting up an approved payment plan with the IRS reduces that rate to 0.25% per month.20Internal Revenue Service. Failure to Pay Penalty On top of both penalties, the IRS charges interest on unpaid balances at 7% per year, compounded daily, as of early 2026.21Internal Revenue Service. Interest Rates Remain the Same for the First Quarter of 2026 Filing late and not paying is the most expensive combination, since both penalties stack alongside the interest.