So how much income tax do you Americans pay?

[omega3]

I'm from Europe and hear mixed stories about income taxes in the US. Is it true that middle class in NY can easily pay 50% on income which seems alot, and is that a combination of federal and state income taxes.

Where is income the lowest and where the highest?

Can you give examples of how income taxes break down and add up where you live and in big places like NY or LA as i suppose the 50% is not all federal taxes, right?

Note: please also mention what you consider "income tax" like just work or also income from stocks etc.. and are the rates the same on those then for work? Thanks.

 

[Oyeve]

I pay 35% on average combined. if it was 50% or higher I wouldnt work and milk the welfare system.

 

[MiniDoom]

probably ~%10 after deductions for my kids and mortgage. wife's going back to work soon so that will go up.

 

[dullard]

A large portion of the population pays 25% federal income tax, 7.65% federal payroll tax which is just an income tax under a different name, and ~7% state income tax. Higher income people pay a higher percent and lower income people pay a lower percent.

So, at first glance it looks like many people pay 39.65% on their total income taxes. However, that is very misleading. That is before deductions and credits. The effective income taxes are closer to ~10.5% federal income tax, 7.65% federal payroll tax, and ~4% state after deductions and credits. Total is about 22% for a typical family. But that will vary quite a bit depending on the actual deductions, credits, and income sources.

A few people have local income taxes that might bring it up a bit.

We also have property and sales taxes to consider. Add a few percent more for each.


Edit, here is a source with similar numbers:
https://en.wikipedia.org/wiki/Progressivity_in_United_States_income_tax#Effective_income_tax_rates
Depending on the income level, they had 2% to 20.9% effective federal income taxes. Then add in the state income tax.

 

[BurnItDwn]

for 2015 .. after any credits/deductions ...


Current:
27.5% of gross in fed + state + FICA + Med
16.1% Federal income tax
6.2% Fica/Soc Sec
1.45% Medicare
3.75% State income tax

Then, there's sales tax which amounts for about 10% of purchase price here in Illinois

My property tax on my home costs about 4% of my annual income.

Most years, if the market is good, I might sell 5-10K worth of stock and pay 15% capital gains on that.


Once I get Married, I expect my tax liabillity to decline by several thousand just by filing jointly.

 

[brianmanahan]

A large portion of the population pays 25% federal income tax

the majority are %15 or below:

 

[3chordcharlie]

I pay 35% on average combined. if it was 50% or higher I wouldnt work and milk the welfare system.

That would be silly.

As in cut off your nose to spite your face.

 

[HamburgerBoy]

Effective rate is sub-10%.

 

[Fenixgoon]

20-25%? in Texas, no state tax ftw

 

[pete6032]

I live in Chicago, the 3rd largest US city. Federal income tax I was somewhere between 10-15% of my income, state income tax was about 4% of my income. These are calculated after the 6.2% FICA taxes, which every American pays. FICA covers social security, unemployment insurance, and single payer health care for those over age 65.

Sales tax here is about 10% on all purchases.

 

[omega3]

20-25%? in Texas, no state tax ftw

So where does Texas get the money to pay for road repairs, cleaning drinkwater, the lights in the streets, etc..?

I live in Chicago, the 3rd largest US city. Federal income tax I was somewhere between 10-15% of my income, state income tax was about 4% of my income. These are calculated after the 6.2% FICA taxes, which every American pays. FICA covers social security, unemployment insurance, and single payer health care for those over age 65.

Sales tax here is about 10% on all purchases.

Are the rates you gave after deductions?

 

[ControlD]

So where does Texas get the money to pay for road repairs, cleaning drinkwater, the lights in the streets, etc..?

Road funding in Texas comes mainly from oil and gas taxes from what I remember. I'm sure other taxes pay for the other things.

 

[Londo_Jowo]

20-25%? in Texas, no state tax ftw

Same here and living in an area with fairly low property taxes as well.

 

[Meghan54]

Road funding in Texas comes mainly from oil and gas taxes from what I remember. I'm sure other taxes pay for the other things.

Having one of the highest effective property tax rates in the nation probably helps. Texas is ranked #6 in the nation, behind NJ, IL, NH, CT, and WI. For comparison, CA ranks #34 in property taxes.

http://taxfoundation.org/blog/how-high-are-property-taxes-your-state
(Reflects tax rates as of Aug. 2015; may not reflect changes made for 2016.)

 

[Oyeve]

That would be silly.

As in cut off your nose to spite your face.

It's a joke, sucka.

 

[overst33r]

Effective rate is sub-10%.

this.

2015 was ~7%. however this year will be higher due to losing the IRA deduction

 

[Londo_Jowo]

Having one of the highest effective property tax rates in the nation probably helps. Texas is ranked #6 in the nation

I know there's some areas (mostly large cities) in the state that have high property tax rates however, I pay 1.25% (2015) where I live. 1.39% in 2014, 1.45% in 2013. As more homes are built the lower the tax rate the Municipality Utility District charges

http://www.taxtech.net/TaxRates.aspx

 

[Spungo]

I pay 35% on average combined. if it was 50% or higher I wouldnt work and milk the welfare system.

What do you do for a living?

My income is not high enough for that amount of tax, so I'm in that 10-20% range. It doesn't sound that bad, but then I work it out and realize taxes are my single largest living expense. The amount I pay in taxes is more than double my mortgage and utilities combined.

 

[zinfamous]

What do you do for a living?

My income is not high enough for that amount of tax, so I'm in that 10-20% range. It doesn't sound that bad, but then I work it out and realize taxes are my single largest living expense. The amount I pay in taxes is more than double my mortgage and utilities combined.

If you are already in that range, shouldn't you be able to drop the rate down to at most 7-10%, or even 0% through IRA deductions and maxing employer 401/403 contributions, if available?

My next goal is to open up an HSA (I think I qualify, have to look at my Kaiser plan, again), and just get free savings and free money and free free free. I've ignored them until now, because I assumed it was the same as those Flex spending account which disappears each year. HSA is different though--pre-tax savings, tax-sheltered growth, and un-taxed withdrawals if you swing it properly.



http://www.madfientist.com/ultimate-retirement-account/
http://www.madfientist.com/hsa/

 

[JockoJohnson]

If you are already in that range, shouldn't you be able to drop the rate down to at most 7-10%, or even 0% through IRA deductions and maxing employer 401/403 contributions, if available?

My next goal is to open up an HSA (I think I qualify, have to look at my Kaiser plan, again), and just get free savings and free money and free free free. I've ignored them until now, because I assumed it was the same as those Flex spending account which disappears each year. HSA is different though--pre-tax savings, tax-sheltered growth, and un-taxed withdrawals if you swing it properly.



http://www.madfientist.com/ultimate-retirement-account/
http://www.madfientist.com/hsa/

I read those links. It would be interesting if true. I am so used to the FSA that is restrictive. Never knew there was another type.

 

[soulcougher73]

Our effective tax rate last year was 13.7% for Fed/State.

 

[fskimospy]

If you are already in that range, shouldn't you be able to drop the rate down to at most 7-10%, or even 0% through IRA deductions and maxing employer 401/403 contributions, if available?

My next goal is to open up an HSA (I think I qualify, have to look at my Kaiser plan, again), and just get free savings and free money and free free free. I've ignored them until now, because I assumed it was the same as those Flex spending account which disappears each year. HSA is different though--pre-tax savings, tax-sheltered growth, and un-taxed withdrawals if you swing it properly.



http://www.madfientist.com/ultimate-retirement-account/
http://www.madfientist.com/hsa/

Not just that, but you would be amazed at what expenses qualify as HSA eligible. With a pliant doctor you can get central air installed in your house using your HSA money. Reclining chairs, etc, etc.

 

[zinfamous]

I read those links. It would be interesting if true. I am so used to the FSA that is restrictive. Never knew there was another type.

Yeah I just learned about this trick 2 weeks ago. It seems completely legit, the only caveat being: "for now." Who knows what the rules will be 5, 15, 20 years down the line, especially when you will be looking to take advantage of the rollover and withdrawals.

They exist only because of the increased number of high-deductible health plans and with healthcare so volatile these days, this may all change within 10 years.

I would think that should the HSA's intended utility change (drastic change in national healthcare policy), there would at least be a ~60 day grace period to claim that fund back into an IRA or something, with no penalty, right? So I'm thinking that no matter what happens, it's pretty stupid not to get one now if you qualify. :\

 

[zinfamous]

Not just that, but you would be amazed at what expenses qualify as HSA eligible. With a pliant doctor you can get central air installed in your house using your HSA money. Reclining chairs, etc, etc.

oh shit....you fooling?

Think I could use it to buy a spendy Aeron chair if I get a note from the doc?

 

[brianmanahan]

It seems completely legit, the only caveat being: "for now."

and depends on your job offering an HDHP

i did the stealth IRA HSA for a year but then switched jobs to a place with 0$ deductible insurance

so i can't contribute to an HSA anymore, and am just using up the couple grand in there as i get opportunities (which aren't many with no deductible insurance)