Effective Federal Tax Rate by Income Percentile: Who Pays What Rate

Findings

8.1% Effective Rate for the Median Filer

Filers at the 50th income percentile pay an effective federal income tax rate of 8.1%, according to IRS Statistics of Income data.IRS Statistics of Income, Individual Income Tax Returns Complete Report (Table 1.4), 2023 After the standard deduction reduces taxable income, primarily the 10% and 12% marginal brackets remain in play. Filers reach this level through Federal Tax Brackets by Year that start at low thresholds for single and joint returns. Lower on the distribution, the 25th percentile effective rate drops to about 3%, thanks to the Earned Income Tax Credit offsetting much of the liability.IRS SOI, Shares of Federal Income Tax by Percentile, 2023 At the 75th percentile, the effective rate climbs to 12.3%, as a portion of income enters the 22% bracket per IRS data.

SOI Table 1.4 confirms the median figure holds across recent filing years, including 2023. The standard deduction subtracts $13,850 for singles before brackets apply, as documented on the Data Methodology page. This structure keeps most median filers out of the 24% bracket, which begins at $100,525 for singles. Refundable credits pull rates below the median for the bottom quartile, but most filers near the center avoid negative territory.

Joint filers at median income see a similar effective rate after their doubled standard deduction. The Federal Tax Calculator replicates these results by inputting 50th percentile AGI values from IRS data.

11.6 Percentage-Point Marginal vs. Effective Rate Gap

Top earners record a 25.4% effective federal income tax rate against their 37% marginal rate, creating an 11.6 percentage-point gap in IRS SOI data.IRS Statistics of Income, Individual Income Tax Returns Complete Report (Table 1.4), 2023 Capital gains taxed at preferential rates (0-20%) drive this spread, per SOI percentile shares. The 90th percentile shows a 16.8% effective rate spanning the 22% and 24% brackets. Filers above the 90th percentile derive significant investment income taxed below ordinary rates.

Charitable deductions further compress the effective rate below the statutory 37%. The alternative minimum tax hits less than 0.2% of filers, concentrated in the top 5%, after TCJA changes. The Marginal vs. Effective Tax Rates Guide details how the top marginal rate applies only to income above $609,350 for singles.

Congressional Budget Office distribution tables align with IRS SOI on the top-earner gap.Congressional Budget Office, Distribution of Household Income, 2023 Preferential rates cap at 20% for long-term gains, pulling the effective rate well below the marginal ceiling. The 24% bracket threshold at $100,525 for singles falls near the 80th percentile, so 90th-percentile filers face mixed 22% and 24% ordinary income plus lower gains rates.

How Credits Compress the Bottom Half

Filers in the bottom half average a 3.7% effective federal income tax rate from the 10% bracket on income above the standard deduction, per IRS SOI Table 1.4.IRS Statistics of Income, Individual Income Tax Returns Complete Report (Table 1.4), 2023 Refundable credits like EITC and ACTC yield negative effective rates for 15-20% of bottom quartile filers. The 25th percentile lands at about 3% after these credits and the standard deduction.

EITC phases in below median income, turning 10% bracket taxes into refunds for many. Tax Revenue by Income Group shows the bottom half contributes minimal net revenue after credits.

CBO tables match IRS SOI on the bottom-half average and the share of filers with negative rates.Congressional Budget Office, Distribution of Household Income, 2023 The standard deduction zeroes out taxable income for many, leaving credits to handle residuals. ACTC stacks on EITC for families, pushing more into negative territory per percentile shares. The Data Methodology page verifies these figures from raw return counts.

The median effective rate bridges low-end compression from credits and rising exposure to 12.3% at the 75th percentile, while the marginal-effective gap peaks at the top with roughly a quarter of income owed versus the statutory 37%. Preferential capital gains rates above the 90th percentile mirror credit effects at the bottom, keeping effective rates below marginal brackets listed in Federal Tax Brackets by Year. Filers can compute personal positions via the Federal Tax Calculator, drawing from these IRS datasets.