The top federal income tax rate is 37 percent, applied to the highest earners

The United States uses a progressive tax system, meaning tax rates increase as your income rises. The highest federal income tax bracket is 37 percent, which applies to income above a certain threshold that changes each year. For 2024, this top rate kicks in at $191,950 for single filers, $287,925 for married couples filing jointly, and $191,950 for heads of household.

This does not mean you pay 37 percent on all your income. Instead, you pay the 37 percent rate only on the dollars that fall into that highest bracket. The income below that threshold is taxed at lower rates—10 percent, 12 percent, 22 percent, 24 percent, 32 percent, and 35 percent—depending on which bracket each portion falls into. This structure is why the effective tax rate (the percentage you actually pay on your total income) is always lower than your marginal rate (the rate on your last dollar earned).

Key Takeaways

  • The 37 percent federal income tax rate applies only to income above the highest bracket threshold, which varies by filing status and changes annually.
  • A progressive tax system means lower-income portions of your earnings are taxed at lower rates, so your overall tax burden is less than 37 percent even if you reach the top bracket.
  • The income thresholds for the top bracket are adjusted each year for inflation, so the dollar amount that triggers the 37 percent rate increases over time.
  • State and local income taxes are separate from federal rates and vary widely depending on where you live.

How the tax brackets work with the 37 percent rate

The 37 percent rate is the marginal rate—the tax on your last dollar of income. To understand what you actually owe, you need to see how all the brackets stack. If you are a single filer in 2024, your income is taxed like this: the first $11,600 at 10 percent, the next portion up to $47,150 at 12 percent, and so on, until you reach $191,950. Only the income above $191,950 is taxed at 37 percent.

This means if you earn $200,000 as a single filer, you do not pay 37 percent on the full amount. You pay 37 percent only on the $8,050 that exceeds $191,950. The rest is taxed at the lower rates that explore to each bracket. Your effective tax rate—the total tax divided by total income—will be roughly 24 to 25 percent, not 37 percent.

The bracket thresholds are adjusted annually for inflation, so the dollar amounts that define each bracket shift each year. The IRS publishes updated brackets in late fall for the following tax year, which is why the numbers change from 2024 to 2025 and beyond.

When the 37 percent rate was introduced and how it has changed

The current 37 percent top rate was set by the Tax Cuts and Jobs Act of 2017. Before that, the highest federal rate was 39.6 percent, which applied to the highest earners during the Obama administration. The 2017 law lowered the top rate to 37 percent and is scheduled to expire after 2025, meaning the rate could revert to 39.6 percent unless Congress extends it.

Historically, the top federal income tax rate has been much higher. During the 1950s and 1960s, the top rate exceeded 90 percent. It dropped to 70 percent in the 1980s under President Reagan, then rose to 39.6 percent in the 1990s. The rate has fluctuated based on which party controlled Congress and the presidency, so it is not fixed permanently.

The difference between federal, state, and local income taxes

The 37 percent federal rate is separate from state and local income taxes. Some states have no income tax at all—including Texas, Florida, Wyoming, and Alaska. Others tax income at rates ranging from about 1 percent to over 13 percent, depending on the state and your income level. A few cities also impose local income taxes on top of state rates.

Your total tax burden depends on where you live. A high earner in California, which has a top state rate of 13.3 percent, pays significantly more in total income tax than someone earning the same amount in Texas, which has no state income tax. When you see references to "total income tax," it usually means federal plus state plus local combined.

How deductions and credits reduce the amount subject to the 37 percent rate

You do not pay the 37 percent rate on your gross income. Instead, you pay it on your taxable income, which is your gross income minus deductions. The standard deduction—a flat amount everyone can subtract—reduces taxable income for most filers. For 2024, the standard deduction is $14,600 for single filers and $29,200 for married couples filing jointly.

Some people itemize deductions instead, listing specific expenses like mortgage interest, property taxes, and charitable donations. Whichever method you use, the result is a lower taxable income, which means less of your earnings are subject to the 37 percent rate. Tax credits—such as the Earned Income Tax Credit or the Child Tax Credit—reduce your tax bill dollar-for-dollar after your rate is calculated, providing additional relief.

Investment income and the Net Investment Income Tax

High earners may also owe the Net Investment Income Tax, which is a 3.8 percent tax on certain investment income. This applies to single filers with modified adjusted gross income over $200,000 and married couples over $250,000. It is separate from the 37 percent income tax rate and applies to capital gains, dividends, interest, and rental income.

This means a high earner could owe 37 percent federal income tax plus 3.8 percent Net Investment Income Tax on investment gains, for a combined federal rate of 40.8 percent on that portion of income. State and local taxes would be added on top of that. Understanding which income is subject to which rate is important for tax planning, especially for people with significant investment portfolios.

Frequently Asked Questions

Does everyone in the top bracket pay 37 percent on all their income?

No. The 37 percent rate applies only to income above the bracket threshold. If you earn $200,000 and the threshold is $191,950, you pay 37 percent only on the $8,050 above the threshold. All income below that is taxed at lower rates based on which bracket it falls into.

Will the 37 percent rate stay the same in 2026?

The current 37 percent rate is set to expire after 2025 unless Congress extends it. If it expires, the top rate is scheduled to revert to 39.6 percent. Congress will likely address this before the end of 2025, but the outcome is not certain.

How does the 37 percent federal rate compare to other countries?

The United States top federal rate of 37 percent is lower than many developed nations. Some countries have top rates exceeding 50 percent, though they often have different tax structures and deductions. Comparing tax rates across countries is complex because the systems differ significantly.

Can I reduce the amount of income subject to the 37 percent rate?

Yes. Using the standard deduction or itemizing deductions lowers your taxable income, which reduces the amount subject to the 37 percent rate. Contributing to retirement accounts like a 401(k) or traditional IRA also reduces taxable income. Tax planning strategies vary based on your situation.