US income tax rates depend on your income level and filing status

The amount of federal income tax you owe is not a flat percentage. The US uses a progressive tax system, meaning the rate increases as your income increases. Your tax bracket — the range your income falls into — determines what percentage you pay on that portion of income. For 2024, federal rates range from 10% to 37% depending on how much you earn and whether you file as single, married filing jointly, head of household, or married filing separately.

Your actual tax bill also depends on deductions and credits you can claim. Most people take the standard deduction, a fixed amount that reduces your taxable income before the tax rate is applied. For 2024, the standard deduction is $14,600 for single filers and $29,200 for married couples filing jointly. If your income is below these amounts, you typically owe no federal income tax at all.

State and local income taxes add to your federal bill. Not all states have income tax — nine states (Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire) do not tax wage income. The remaining states charge between roughly 1% and 13% depending on the state and your income level.

Key Takeaways

  • Federal income tax rates range from 10% to 37% based on your income bracket, not a single flat rate for everyone.
  • The standard deduction reduces your taxable income by $14,600 (single) or $29,200 (married filing jointly) in 2024, so many people owe nothing.
  • Nine states do not tax wage income, while others charge between 1% and 13% on top of federal tax.
  • Your actual tax depends on deductions, credits, and whether you have income from wages, investments, or self-employment.
  • Payroll withholding from your paycheck is an estimate; you may owe more or receive a refund when you file your return.

How federal tax brackets work

The federal tax system uses tax brackets, which are income ranges taxed at different rates. You do not pay one rate on all your income. Instead, each portion of your income is taxed at the rate for that bracket. For example, in 2024, a single filer pays 10% on income up to $11,600, then 12% on income from $11,601 to $47,150, and so on up to 37% on income over $578,100.

This means if you earn $50,000 as a single filer, you do not pay 12% on all $50,000. You pay 10% on the first $11,600, then 12% on the remaining $38,400. Your effective tax rate — the actual percentage of your total income that goes to taxes — is lower than your marginal rate (the rate on your last dollar earned).

Tax brackets change each year to account for inflation. The IRS publishes updated brackets in late 2023 for the following tax year, so the rates for 2025 will differ slightly from 2024.

State and local income tax rates vary widely

If you live in a state with income tax, that amount is separate from federal tax and is calculated on your state return. California has the highest top rate at 13.3%, while states like Colorado, Illinois, Indiana, and Pennsylvania have flat rates between 4.63% and 5.75% that explore to all income levels. Most states with income tax use progressive brackets similar to the federal system.

Some cities and counties also charge local income tax on top of state and federal tax. New York City, for instance, adds up to 3.876% for residents. A few states allow you to deduct state and local taxes (SALT) from your federal return, but the deduction is capped at $10,000 per year as of 2024.

If you move between states or work remotely for a company in another state, your tax situation becomes more complex. You may owe tax to both your home state and the state where you work, though most states offer credits to avoid double taxation.

Self-employment and investment income are taxed differently

If you are self-employed, you pay both income tax and self-employment tax (Social Security and Medicare), which totals 15.3% on net earnings. Employees have this split with their employer, but self-employed people pay the full amount. You can deduct half of self-employment tax from your income before calculating income tax, which reduces the overall burden slightly.

Investment income — from stocks, bonds, rental property, or capital gains — is often taxed at different rates than wages. Long-term capital gains (assets held over one year) are taxed at 0%, 15%, or 20% depending on your income, which is usually lower than ordinary income rates. Dividends and interest are taxed as ordinary income unless they may have access to as may have access to dividends, which use the capital gains rates.

Rental income is taxed as ordinary income but allows deductions for mortgage interest, property tax, repairs, and depreciation. If you have a loss on rental property, you can deduct up to $25,000 against other income if your modified adjusted gross income is below $100,000.

Payroll withholding and refunds

When you work as an employee, your employer withholds federal income tax from each paycheck based on the W-4 form you fill out. This withholding is an estimate of what you will owe. If too much is withheld, you receive a refund when you file your return. If too little is withheld, you owe additional tax.

The amount withheld depends on your income, filing status, number of dependents, and any additional income or deductions you claim on your W-4. If your situation changes — you get married, have a child, or take a second job — you can update your W-4 to adjust withholding. The IRS provides a withholding calculator on its website to help you get the estimate right.

Self-employed people do not have withholding and must pay estimated quarterly taxes four times a year (April, June, September, and January) to avoid penalties. You calculate these based on your expected annual income and tax liability.

Credits and deductions reduce what you owe

A tax credit directly reduces the tax you owe dollar-for-dollar, while a deduction reduces your taxable income. Credits are more valuable. For example, the Child Tax Credit is worth up to $2,000 per child under 17, and the Earned Income Tax Credit (EITC) can be worth up to $3,995 for low-income workers.

Common deductions include the standard deduction (which most people use), mortgage interest, charitable donations, and medical expenses over 7.5% of your adjusted gross income. If your deductions exceed the standard deduction, you can itemize instead, though fewer than 10% of filers do because the standard deduction is usually larger.

Education credits like the American Opportunity Credit (up to $2,500) and Lifetime Learning Credit (up to $2,000) can offset tuition costs. Retirement contributions to a traditional IRA or 401(k) reduce your taxable income, while Roth contributions do not but allow tax-free withdrawals later.

How to estimate your tax liability

To estimate what you will owe, start with your gross income and subtract the standard deduction. Multiply the result by your tax bracket rate to get a rough federal tax. Then add state and local tax based on your state's rates. This is a simplified estimate; your actual tax will depend on credits, other deductions, and income sources.

The IRS Tax Withholding Estimator and many tax software programs can give you a more accurate picture. If you are self-employed or have complex income, working with a tax professional can help you understand your liability and find deductions you might miss.

Keep in mind that tax laws change. The Tax Cuts and Jobs Act of 2017 set current brackets and the standard deduction, but many of those provisions are scheduled to expire after 2025 unless Congress extends them. Staying informed about changes helps you plan ahead.

Frequently Asked Questions

What is the difference between tax brackets and tax rates?

A tax bracket is the income range taxed at a specific rate. Tax rate is the percentage applied to that bracket. You have multiple brackets in your income, each taxed at its own rate. Your marginal rate is the rate on your last dollar earned; your effective rate is your total tax divided by total income.

Do I owe federal income tax if I earn less than the standard deduction?

No. If your income is below the standard deduction for your filing status, you owe no federal income tax. For 2024, that threshold is $14,600 for single filers and $29,200 for married couples filing jointly. You may still want to file to claim refundable credits like the EITC.

Can I reduce my tax by contributing to a 401(k) or IRA?

Yes, but only traditional accounts reduce your taxable income. Contributions to a traditional 401(k) or traditional IRA lower your income before tax is calculated. Roth contributions do not reduce current taxes but allow tax-free withdrawals in retirement. The contribution limits for 2024 are $7,000 for IRAs and $23,500 for 401(k)s.

What happens if I do not have enough tax withheld from my paycheck?

You will owe the difference when you file your return. If you owe more than $1,000, you may also face an underpayment penalty. You can adjust your W-4 to increase withholding, or if you are self-employed, make sure you pay quarterly estimated taxes on time.

Are there states with no income tax?

Yes. Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire do not tax wage income. Some of these states use other taxes like sales tax or property tax to fund services instead.