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United States

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Individual - Taxes on personal income

The United States levies tax on its citizens and residents on their worldwide income. Non-resident aliens are taxed on their US-source income and income effectively connected with a US trade or business (with certain exceptions).

Personal income tax rates

For individuals, the top income tax rate for 2023 is 37%, except for long-term capital gains and qualified dividends (discussed below).

P.L. 115-97 reduced both the individual tax rates and the number of tax brackets. P.L. 115-97 sunsets after 2025 many individual tax provisions, including the lower rates and revised brackets, in order to comply with US Senate budget rules.

2023 income tax rates and brackets

Single taxpayers (1)
Taxable income (USD) Tax rate
0 to $11,000 10%
$11,001 to $44,725 12%
$44,726 to $95,375 22%
$95,376 to $182,100 24%
$182,101 to $231,250 32%
$231,251 to $578,125 35%
$578,126+ 37%
Married taxpayers filing jointly (1, 2)
Taxable income (USD) Tax rate
0 to $22,000 10%
$22,001 to $89,450 12%
$89,451 to $190,750 22%
$190,751 to $364,200 24%
$364,201 to $462,500 32%
$462,501 to $693,750 35%
$693,751+ 37%
Head-of-household taxpayers (1, 2)
Taxable income (USD) Tax rate
0 to $15,700 10%
$15,701 to $59,850 12%
$59,851 to $95,350 22%
$95,351 to $182,100 24%
$182,101 to $231,250 32%
$231,251 to $578,100 35%
$578,101+ 37%
Married taxpayers filing separately (1)
Taxable income (USD) Tax rate
0 to $11,000 10%
$11,001 to $44,725 12%
$44,726 to $95,375 22%
$95,376 to $182,100 24%
$182,101 to $231,250 32%
$231,251 to $346,875 35%
$346,876+ 37%

Notes

  • The maximum federal income tax rate on ‘qualified dividends’ received from a domestic corporation is 20%. The maximum federal tax rate on capital gains is 20% for assets held for more than 12 months. The graduated rates of tax apply to capital gains from assets held for 12 months or less.
  • Non-resident aliens may not take advantage of head of household status or joint return rates.

Alternative minimum tax (AMT)

In lieu of the tax computed using the above rates, the individual AMT may be imposed under a two-tier rate structure of 26% and 28%. For tax year 2022, the 28% tax rate applies to taxpayers with taxable incomes above USD 206,100 (USD 103,050 for married individuals filing separately). For tax year 2023, the 28% tax rate applies to taxpayers with taxable incomes above USD 220,700 (USD 110,350 for married individuals filing separately).

For 2022, the AMT exemption amount is USD 118,100 for married taxpayers filing a joint return (half this amount for married taxpayers filing a separate return) and USD 75,900 for all other taxpayers (other than estates and trusts), and the phase-out thresholds are USD 1,079,800 for married taxpayers filing a joint return and USD 539,900 for all other taxpayers (other than estates and trusts). For 2023, the AMT exemption amount is USD 126,500 for joint filers (half of this amount for married taxpayers filing a separate return), and USD 81,300 for all other taxpayers other than estates and trusts. The phase-out thresholds increase to USD 1,156,300 for joint filers and USD 578,150 for all other taxpayers other than estates and trusts.

The AMT is payable only to the extent it exceeds the regular net tax liability. The foreign tax credit is available for determining AMT liability to the extent of the foreign tax on the foreign-source AMT income (AMTI), subject to certain limitations.

AMTI generally is computed by starting with regular taxable income, adding tax preference deductions (claimed in the computation of regular taxable income), and making special adjustments to some of the tax items that were used to calculate taxable income. For example, the taxpayer must add back all state and local income taxes deducted in computing regular taxable income.

For non-resident aliens with a net gain from the sale of US real property interests, the AMT is calculated on the lesser of AMTI (before the exemption) or the net gain from the sale of the US real property interest.

Medicare contribution tax

For tax years beginning after 31 December 2012, a 3.8% 'unearned income Medicare contribution' tax applies on the lesser of (i) the taxpayer's net investment income for the tax year or (ii) the taxpayer's excess modified adjusted gross income over a threshold amount (generally, USD 200,000 for single taxpayers and heads of households; USD 250,000 for a married couple filing a joint return and surviving spouses; and USD 125,000 for a married individual filing a separate return). The tax, which is in addition to the regular income tax liability, applies to all individuals subject to US taxation other than non-resident aliens. Net investment income generally includes non-business income from interest, dividends, annuities, royalties, and rents; income from a trade or business of trading financial instruments or commodities; income from a passive-activity trade or business; and net gain from the disposition of non-business property.

State and local income taxes

Most states, and a number of municipal authorities, impose income taxes on individuals working or residing within their jurisdictions. Most of the 50 states impose some personal income tax, with the exception of Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming, which have no state income tax. New Hampshire and Tennessee (until 1 January 2021) tax only dividend and interest income. Few states impose an income tax at rates that exceed 10%.

FAQs

How much is the income tax in USA?
The U.S. currently has seven federal income tax brackets, with rates of 10%, 12%, 22%, 24%, 32%, 35% and 37%. If you're one of the lucky few to earn enough to fall into the 37% bracket, that doesn't mean that the entirety of your taxable income will be subject to a 37% tax. Instead, 37% is your top marginal tax rate.
How much tax do you pay on your salary in USA?
Income taxes in the U.S. are calculated based on tax rates that range from 10% to 37%. Taxpayers can lower their tax burden and the amount of taxes they owe by claiming deductions and credits.
What is income tax called in USA?
Federal income taxes are considered a marginal tax or progressive tax and apply to all forms of earnings that make up a taxpayer's taxable income, including wages, salaries, commissions, bonuses, tips, investment income, and certain types of unearned income.
How much is tax in USA for foreigners?
A foreign national is generally subject to federal withholding tax on the U.S. source income in most cases at a standard flat rate of 30%.
Which country is most tax free?
Bermuda, Monaco, the Bahamas, and the United Arab Emirates (UAE) are four countries that do not have personal income taxes.

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