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

The highest federal income tax rate in the United States is 37 percent. This rate applies to taxable income above a certain threshold that changes each year. For the 2024 tax year, the 37 percent rate kicks in at $191,950 of taxable income for single filers, $287,925 for married couples filing jointly, and $191,950 for heads of household.

The federal tax system uses tax brackets, which means you do not pay 37 percent on all your income. Instead, different portions of your income are taxed at different rates. Only the income that falls into the highest bracket gets taxed at 37 percent. 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 it falls into.

These brackets adjust annually for inflation, so the income thresholds that trigger each rate change from year to year. The IRS publishes updated brackets each January for the tax year ahead.

Key Takeaways

  • The highest federal income tax rate is 37 percent, but it applies only to income above a threshold that varies by filing status and year.
  • The federal system uses tax brackets, so different portions of your income are taxed at different rates — not your entire income at the top rate.
  • Tax brackets adjust for inflation each year, so the income level that triggers the 37 percent rate changes annually.
  • State and local taxes are separate from federal rates and vary widely depending on where you live.
  • The 37 percent rate has been the top federal rate since 2018, when it replaced the previous top rate of 39.6 percent.

How tax brackets work with the 37 percent rate

Understanding tax brackets is the key to understanding why the highest rate does not mean you pay that rate on all your earnings. Imagine you are a single filer in 2024 with $250,000 in taxable income. You do not pay 37 percent on the full $250,000. Instead, your income is divided into chunks, each taxed at the rate for that bracket.

The first $11,600 of your income is taxed at 10 percent. The next portion up to $47,150 is taxed at 12 percent. This continues through each bracket until you reach the threshold for the 37 percent bracket. Only the income above $191,950 — in this example, $58,050 — is taxed at 37 percent. Your overall tax rate on the full $250,000 is much lower than 37 percent because most of your income was taxed at lower rates.

This structure is called a progressive tax system. It means higher earners pay a larger share of their income in taxes, but the rate increases gradually as income rises, not all at once.

When the 37 percent rate applies to you

The 37 percent rate applies only if your taxable income exceeds the threshold for your filing status. Taxable income is not the same as gross income — it is what remains after you subtract deductions and adjustments. Most people use either the standard deduction or itemized deductions to reduce their taxable income.

For 2024, the standard deduction is $14,600 for single filers and $29,200 for married couples filing jointly. This means a single person earning $200,000 in gross income would have $185,400 in taxable income after the standard deduction, which still falls into the 37 percent bracket. A married couple earning $300,000 would have $270,800 in taxable income, also reaching the top bracket.

If you have significant deductions — mortgage interest, charitable contributions, or business expenses — your taxable income could be lower, which might keep you out of the highest bracket entirely. This is why two people with the same gross income can owe different amounts in federal tax.

How the 37 percent rate has changed over time

The top federal tax rate has fluctuated throughout U.S. history. From 2013 through 2017, the highest rate was 39.6 percent. The Tax Cuts and Jobs Act, passed in December 2017, lowered the top rate to 37 percent starting in 2018. This rate is scheduled to remain in place through 2025, after which the law currently reverts to the previous structure unless Congress extends it.

Before 2013, the top rate was also 39.6 percent. Going further back, rates have been much higher — in the 1950s and 1960s, the top federal rate exceeded 70 percent. The rate you pay depends on the tax law in effect for the year you are filing, which Congress can change.

Federal versus state and local taxes

The 37 percent federal rate is separate from state and local income taxes. Some states have no income tax at all — including Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming. Other states have income tax rates that range from less than 1 percent to over 13 percent, depending on the state and your income level.

Your total tax burden combines federal, state, and local taxes. A person in the 37 percent federal bracket living in California, which has a top state rate of 13.3 percent, would owe a combined rate of over 50 percent on the highest portion of their income. Someone in the same federal bracket living in Texas, which has no state income tax, would owe only the 37 percent federal rate on that income.

When you see headlines about "the highest tax rate," check whether they are referring to federal taxes alone or a combined total. The distinction matters significantly for your actual tax bill.

How self-employment and investment income affect your rate

The 37 percent rate applies to ordinary income — wages, salaries, and business profits. Investment income is taxed differently. Long-term capital gains (profits from selling an asset you held for more than a year) and may have access to dividends are taxed at preferential rates: 0 percent, 15 percent, or 20 percent, depending on your income level. These rates are lower than the ordinary income brackets.

Self-employed people pay the same income tax rates as employees, but they also owe self-employment tax, which funds Social Security and Medicare. Self-employment tax is 15.3 percent on 92.35 percent of your net self-employment income, in addition to your regular income tax. This means a self-employed person in the 37 percent bracket effectively pays a higher total rate than an employee at the same income level.

Frequently Asked Questions

Does everyone in the 37 percent bracket pay exactly 37 percent of their income?

No. Only the portion of your income that falls into the 37 percent bracket is taxed at that rate. The rest of your income is taxed at lower rates. Your overall effective tax rate — the percentage of your total income that goes to federal taxes — is always lower than your marginal rate (the rate on your last dollar of income).

What is the difference between marginal rate and effective rate?

Your marginal rate is the tax rate on your last dollar of income — in this case, 37 percent. Your effective rate is your total federal tax divided by your total taxable income. Someone earning $250,000 might have an effective rate of around 28 percent even though their marginal rate is 37 percent.

Will the 37 percent rate change after 2025?

The current 37 percent top rate is set to expire after 2025 unless Congress extends it. If no action is taken, the top rate would revert to 39.6 percent in 2026. Congress may change tax rates at any time through new legislation.

Do I owe the 37 percent rate if I earn $200,000?

Not necessarily. It depends on your filing status and deductions. For 2024, a single filer needs taxable income above $191,950 to reach the 37 percent bracket. After subtracting the standard deduction or itemized deductions, your taxable income might be lower than your gross income, which could keep you below the threshold.

How do state taxes affect the 37 percent federal rate?

State taxes are calculated separately and added on top of federal taxes. They do not change the federal rate itself, but they do increase your total tax burden. Your combined federal and state rate depends on which state you live in and its tax structure.