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How Much Does the Average American Pay in Taxes?

By Brian Feroldi – Mar 14, 2017 at 8:43AM

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Here's a look at what the average American family pays in taxes each year. How do you compare?

The American tax season is in full swing, which means that millions of U.S. citizens have already written a painful check to the government. Curious to know how much the average American family pays in taxes each year? Below are some numbers that can help to answer that question.

business man looking through bill in details

Image Source: Getty Images.

Federal taxes

According to the IRS, Americans filed more than 150.6 million tax returns in 2015. During that year they also earned $10.17 trillion in adjusted gross income and had a total tax liability of $1.45 trillion. Some quick division means that the average gross income per return was $67,564 while the average federal tax hit was $9,655. That gives the average American family a federal tax rate of 14.3%.

However, the above figures above can be a bit misleading. Many low-income Americans actually have a negative federal tax bill thanks to the Earned Income Tax Credit. If you remove those returns from the equation then you are left with 99 million Americans who recorded an average federal tax hit of $14,654.

Social Security and Medicare Taxes

Almost every employee in the U.S. knows that their employer automatically takes a small bite out of their paycheck to cover Social Security and Medicare taxes. What they might not know is that these automatic taxes are deducted regardless of citizenship or residence. That means that some U.S. employees are paying these taxes even though they might not be qualified to collect social security or Medicare benefits down the road.

If you've ever looked at your own paycheck and done the math, you might guess that the social security tax rate is 6.2%. That's true, but you might not be aware that your employer is also charged an additional 6.2%. Thus, the total social security hit is actually 12.4%.

It is worth noting that some Americans actually pay less than the 6.2% rate. The reason is that the IRS sets a cap on the total amount of social security taxes that can be collected from an employee in a given tax year. For 2017, the maximum wage that's subject to social security tax is $127,200. Therefore, anyone who earns more than that figure will pay less than 6.2% on a percentage basis since they exceed the cap.

Turning to Medicare, the assessed rate is 1.45% for both employees and employers, which means that the total tax hit is another 2.9%. However, if you make more $200,000 in a calendar year, your employer is responsible for withholding an additional 0.9% in additional Medicare taxes, regardless of your filing status. Unlike social security taxes, there is also no upper limit on the amount of taxes that can be collected.

State and local income taxes

In contrast to the three taxes listed above, state and local income tax rates can vary widely based on where you live. As an example, seven states do not charge their residents any income tax at all. Meanwhile, high-income earners in California can be charged up to 13.3%! 

Despite the wide range, estimates from the U.S. Census Bureau show that the average state and local income tax rate is about 9.9%.

How Much Does the Average American Pay?

With the huge caveat that the figures calculated above are highly variable from person to person, if you add the four income-based tax rates together you get a total tax rate of 31.85%. Multiply that rate by the average gross income per return and you get a grand total of $20,944. 

Of course, you are likely aware that this figure still doesn't tell the whole story. We haven't even discussed a number of taxes that millions of Americans are subject to such as property tax, vehicle tax, sales tax, and more. Still, if you are looking for what the average American pays in taxes, I'd argue that figure is about $20,944, give or take.

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