Key Takeaways
- Income tax rates are the percentage of your income that a government takes in taxes.
- Progressive tax rates are used by the federal government and most states, meaning that as your taxable income increases, so does your maximum tax rate.
- Tax brackets are the range of taxable income for each tax rate.
- Tax rates have risen and fallen over time, with the top rate as high as 94 percent in 1945 and as low as 37 percent in 2024.
Introduction
An income tax rate is simply the percentage of your income that a government takes in taxes. In the United States, a single income tax rate doesn't usually apply to your entire income, but rather various rates will apply to different portions of your "taxable income"—whatever is left over after you've claimed all the deductions and exemptions for which you are eligible. The number of different tax rates and the income levels at which they apply vary widely.
Progressive tax rates
The federal government and most states use a system of "progressive" income tax rates. This means that as your taxable income increases, so does your maximum tax rate. In the 2024 tax year, for example, single people with a taxable income of $11,600 or less pay federal income tax at the tax rate of 10 percent. However, as taxable income increases, you are subject to tax rates of 12, 22, 24, 32, 35, or 37 percent with the higher rates only applying to the higher portions of your income. People generally refer to the range of taxable income for each tax rate as a “tax bracket.”
How tax brackets work
Progressive tax rates are "marginal," meaning that each rate applies to specific portions of your taxable income within a specified range, or tax bracket. For example, if you file as Single and have taxable income of $200,000 in 2024, then you are in the 32 percent "bracket."
However, you will not pay 32 percent on all taxable income. Instead, you pay 10 percent on everything up to $11,600, then 12 percent on the excess up to $47,150; 22 percent on taxable income over $47,150 and up to $100,525; 24 percent on the amount over $100,525 up to $191,950; 32 percent on the amount over $191,951 up to $243,725; 35 percent on the amount over $243,725 up to $609,350, and 37 percent on the rest.
TurboTax Tip:
Flat taxes are used by some states, which apply a single income tax rate to everyone, regardless of the amount of taxable income earned.
State income tax rates
Although a majority of states impose income taxes in the same way the federal government does, some apply a single income tax rate to everyone, regardless of the amount of taxable income you earn. This is called a "flat tax."
History of income tax rates
Tax rates rise and fall all the time. In 1913, right after the 16th Amendment to the Constitution legalized a direct tax on individual incomes, the marginal federal rates ranged from 1 to 7 percent. To pay for massive military spending during World War II, the top tax rate rose as high as 94 percent in 1945. The top rate remained above 90 percent until the 1960s when it dropped to 70 percent. However, as of 2024, the top rate is a more manageable 37 percent. The number of tax brackets has varied significantly as well. In 1918 there were 56; whereas, in the late 1980s there were only two.
With TurboTax Live Full Service, a local expert matched to your unique situation will do your taxes for you start to finish. Or, get unlimited help and advice from tax experts while you do your taxes with TurboTax Live Assisted.
And if you want to file your own taxes, you can still feel confident you'll do them right with TurboTax as we guide you step by step. No matter which way you file, we guarantee 100% accuracy and your maximum refund.
