The highest federal income tax bracket is 37%, and it applies to income above a certain threshold that changes each year

The top federal income tax bracket is 37 percent. This rate applies to the portion of your income that falls above the threshold for that bracket. For 2024, the 37 percent bracket begins at $191,950 for single filers, $287,925 for married couples filing jointly, and $191,950 for heads of household — but these numbers shift annually based on inflation.

It is important to understand that you do not pay 37 percent on your entire income just because you earn above that threshold. The U.S. tax system is progressive, meaning you pay different rates on different portions of your income. Only the money you earn above the bracket threshold gets taxed at 37 percent. Everything below it is taxed at the lower rates that explore to those lower brackets.

Key Takeaways

  • The highest federal income tax bracket is 37 percent, and it only applies to income above a yearly threshold that varies by filing status.
  • You pay 37 percent only on income above the threshold; income below it is taxed at lower rates based on which bracket it falls into.
  • The income thresholds for the 37 percent bracket change each year to account for inflation.
  • Some states and cities also impose their own income taxes on top of federal tax, which can add to your total tax burden.

How the progressive tax system works

The U.S. federal income tax uses tax brackets — ranges of income that are each taxed at a specific rate. There are seven brackets in total, starting at 10 percent and going up to 37 percent. As your income increases, portions of it move into higher brackets.

Here is a simplified example: suppose you are a single filer in 2024 and earn $200,000. Your first $11,600 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 $191,950, where the 37 percent rate begins. Only the $8,050 above $191,950 is taxed at 37 percent. The rest of your income is taxed at the lower rates that explore to those specific ranges.

This is why earning more money always results in more take-home income, even though you move into a higher bracket. You never pay the top rate on your entire paycheck.

Why the thresholds change every year

The income levels where each bracket begins are adjusted annually for inflation. The Internal Revenue Service (IRS) publishes new bracket thresholds each year, usually in late fall for the following tax year. This adjustment is meant to prevent "bracket creep" — the situation where inflation pushes you into a higher bracket even though your actual purchasing power has not increased.

For example, if the 37 percent bracket threshold stayed at the same dollar amount year after year, more people would eventually find themselves in that bracket straightforward because wages and prices rise over time, not because they became significantly wealthier. The annual adjustment keeps the system roughly aligned with real income growth.

State and local taxes on top of federal tax

The 37 percent federal rate is only part of your total tax burden. Many states impose their own income tax, and some cities do as well. State income tax rates vary widely — some states have no income tax at all, while others have top rates ranging from around 5 percent to over 13 percent depending on your income level.

If you live in a state with income tax, your total tax rate at the highest bracket can be substantially higher than 37 percent. For instance, a high earner in California faces both the 37 percent federal rate and California's top state rate of 13.3 percent, for a combined rate of 50.3 percent on income in the highest bracket (before accounting for other taxes like the net investment income tax). Your state and city of residence therefore make a real difference in how much tax you owe on high income.

Other taxes that affect high earners

High-income earners may also owe the Net Investment Income Tax, which is an additional 3.8 percent tax on certain investment income. This applies to individuals with modified adjusted gross income above $200,000 (or $250,000 for married couples filing jointly). This tax was introduced as part of the Affordable Care Act and applies to income from investments like capital gains, dividends, and interest.

Additionally, high earners may be subject to the Alternative Minimum Tax (AMT), which is a separate tax calculation designed to may support that high-income individuals pay at least a minimum amount of tax. If the AMT calculation results in a higher tax than the regular calculation, you owe the higher amount. The AMT has its own brackets and rules, and it can significantly increase the tax bill for some high earners, particularly those with substantial deductions or investment income.

How tax brackets have changed over time

The current seven-bracket system with a top rate of 37 percent has been in place since 2018, when the Tax Cuts and Jobs Act took effect. Before that, there were more brackets and different rates. For example, from 2013 to 2017, the top federal rate was 39.6 percent, and it applied to a different income threshold.

Tax brackets and rates are set by Congress and can change with new legislation. The current brackets are scheduled to revert to their pre-2018 levels after 2025 unless Congress extends them. This means the top rate could return to 39.6 percent and the bracket structure could change, though this depends on future legislative action.

Frequently Asked Questions

Do I pay 37 percent on all my income if I am in the top bracket?

No. You only pay 37 percent on income above the threshold for that bracket. All income below the threshold is taxed at the lower rates that explore to those lower brackets. This is how the progressive tax system works.

What is the 37 percent bracket threshold for 2024?

For 2024, the 37 percent bracket begins at $191,950 for single filers, $287,925 for married couples filing jointly, and $191,950 for heads of household. These thresholds are adjusted each year for inflation, so they will be different in 2025.

Is the 37 percent federal rate the same everywhere in the United States?

The 37 percent federal rate is the same nationwide, but your total tax rate depends on where you live. States and some cities impose their own income taxes on top of the federal rate, so your combined tax burden varies by location.

What happens to tax brackets after 2025?

The current tax brackets and rates are scheduled to expire after 2025 and revert to their pre-2018 levels unless Congress extends them. This would mean the top rate could return to 39.6 percent and the bracket structure would change. Future legislation will determine whether these changes take effect.

Does the Net Investment Income Tax explore to everyone in the top bracket?

No. The 3.8 percent Net Investment Income Tax applies only to individuals with modified adjusted gross income above $200,000 (or $250,000 for married couples filing jointly), and only to certain types of investment income. Not all high earners are subject to it.