American Income Tax Brackets

Published on February 10, 2025
by Clark Stott
Reviewed by: Jeff Patterson

Clark Stott has been with Expat Tax Online since 2015. Being a dual national based in the UK, Clark has unique experience helping US citizens (and Accidental Americans) become tax compliant via the Streamlined Tax Amnesty program. Clark likes to help Americans in the UK keep their tax situations as simple as possible to avoid harsh IRS treatment.

How do US income tax brackets work?

The United States federal income tax system follows a progressive structure, meaning that different portions of your income are taxed at different rates.

Instead of paying a single tax rate on all income, your earnings are divided into brackets, with each portion taxed at a different percentage.

For example, if a taxpayer’s income falls into two or more brackets, they pay the lower rate on the first portion and progressively higher rates on additional income.

What are US tax brackets, and how do they apply to income?

Tax brackets divide taxable income into different ranges, with each range taxed at a specific percentage. This means that not all of your income is taxed at the same rate. For example, if your income moves into a higher bracket, only the portion within that bracket is taxed at a higher rate, while the rest remains taxed at lower rates.

What are the federal tax brackets for 2024-2025?

The IRS adjusts tax brackets annually to account for inflation.

Below are the tax brackets based on your filing status:

Filing Status	10% Bracket	12% Bracket	22% Bracket	24% Bracket	32% Bracket	35% Bracket	37% Bracket
Single Filers	Up to US$11,600	US$11,601 to US$47,150	US$47,151 to US$100,525	US$100,526 to US$191,950	US$191,951 to US$416,700	US$416,701 to US$609,350	Over US$609,350
Married Filing Jointly	Up to US$23,200	US$23,201 to US$94,300	US$94,301 to US$201,050	US$201,051 to US$383,900	US$383,901 to US$770,800	US$770,801 to US$731,200	Over US$731,200
Heads of Household	Up to US$17,000	US$17,001 to US$68,000	US$68,001 to US$100,525	US$100,526 to US$191,950	US$191,951 to US$416,700	US$416,701 to US$609,350	Over US$609,350

These rates apply to ordinary income but do not cover capital gains tax brackets or corporate income tax rates.

How do US tax brackets affect married taxpayers?

Married couples filing jointly combine their incomes and use the married tax brackets. However, filing separately can sometimes be more beneficial if one spouse has significant deductions.

How are US tax brackets adjusted for inflation?

Each year, the IRS adjusts tax brackets based on inflation measures, such as the Chained Consumer Price Index (C-CPI). This helps prevent “bracket creep”, where inflation increases income but doesn’t increase actual purchasing power.

What deductions and credits can reduce taxable income?

To lower taxable income and potentially drop into a lower bracket, taxpayers can use:

Tax deductions (e.g., mortgage interest, student loan interest)
Tax credits (e.g., Child Tax Credit, Earned Income Tax Credit)

Do state taxes follow the same structure as federal taxes?

State taxes are separate from federal income tax and can vary significantly.

Some states, such as California, use a progressive tax system similar to federal brackets. Others, like Texas and Florida, do not tax personal income at all.

If you are a US expat, it’s best to check whether your former state has residency requirements that may still apply to you.

How do US tax brackets impact US citizens living abroad?

Even if you live outside the US, you must file a US tax return. However, expats can use certain deductions like:

Foreign Earned Income Exclusion (FEIE): Excludes a portion of foreign earnings from US taxation.
Foreign Tax Credit (FTC): Provides a credit for income taxes paid to a foreign country, reducing US tax liability.

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How often do US tax brackets change?

Tax brackets are adjusted each year for inflation, but major changes typically occur when new tax laws are passed. For example, the Tax Cuts and Jobs Act (TCJA) in 2017 restructured tax rates and brackets.

What happens if my income falls into more than one tax bracket?

Your income is taxed in segments. For example, if you earn US$50,000 as a single filer:

The first US$11,600 is taxed at 10%.
The portion between US$11,601 and US$47,150 is taxed at 12%.
The remaining amount above US$47,150 is taxed at 22%.

This ensures that only the portion of your income that enters a higher bracket is taxed at the higher rate.

Are capital gains taxed differently from regular income?

Yes, capital gains are taxed based on how long you held an asset before selling it:

Short-term capital gains (held for one year or less) are taxed at ordinary income tax rates.
Long-term capital gains (held for more than one year) are taxed at reduced rates—either 0%, 15%, or 20%, depending on total taxable income.

What are the Capital Gains tax rates for 2024?

The tax rate for long-term gains depends on your taxable income:

Filing Status	0% Tax Rate (Up to)	15% Tax Rate (Up to)	20% Tax Rate (Above)
Single	US$47,025	US$518,900	US$518,901+
Married Filing Jointly	US$94,050	US$583,750	US$583,751+
Head of Household	US$63,000	US$551,350	US$551,351+

If your income is below the 0% threshold, you pay no tax on long-term capital gains.

Do all investments get the same tax treatment?

No. Some types of investments have different rules:

Collectibles (art, rare coins, etc.) have a higher tax rate of 28%.
Real estate profits may be reduced by special exemptions if it was your primary home.
Mutual funds can create taxable gains even if you didn’t sell anything.

How can I reduce Capital Gains Tax?

Hold investments for at least a year: Long-term gains are taxed at lower rates.
Offset gains with losses: If you lose money on some investments, you can use those losses to reduce the tax on your gains (this is called tax-loss harvesting).
Use tax-advantaged accounts: Profits from investments inside 401(k)s, IRAs, and Roth IRAs grow tax-free or tax-deferred.
Sell a primary home wisely: If you lived in your home for at least 2 out of the last 5 years, you can exclude up to US$250,000 (single) or US$500,000 (married) in gains from taxes.

Do US expats have to pay Capital Gains Tax?

Yes. Even if you live outside the US, you still have to report and pay taxes on capital gains.

However, you may qualify for a Foreign Tax Credit, which helps reduce double taxation if you already paid capital gains tax to another country.

How can I lower my taxable income and reduce my tax bracket?

You can reduce your taxable income through various deductions and credits, such as:

Retirement contributions: Adding money to a 401(k) or traditional IRA lowers taxable income.
Deductions: Certain expenses, like student loan interest and mortgage interest, can be deducted.
Tax credits: Credits like the Child Tax Credit reduce the total amount of tax you owe.
FEIE for expats: US citizens living abroad can exclude foreign earnings up to a set limit.

Does the US tax system use a flat tax rate?

No, the US follows a progressive tax system where tax rates increase as income rises. In contrast, a flat tax system applies the same percentage to all income levels.

What is the Alternative Minimum Tax (AMT)?

The AMT is a separate tax system ensuring high-income earners pay a minimum amount of tax. It recalculates income using fewer deductions and applies different tax rates.

If the AMT amount is higher than your regular tax, you must pay the AMT instead.

How do Marginal and Effective tax rates differ?

Marginal tax rate: The highest tax rate applied to your last dollar of income.
Effective tax rate: The overall percentage of your total income paid in taxes.

For example, if your marginal tax rate is 22%, that rate applies only to the portion of income in that bracket. Your effective tax rate is typically lower because earlier income segments were taxed at lower rates.

What is the Earned Income Tax Credit (EITC)?

The Earned Income Tax Credit (EITC) is a tax break designed to help low- to moderate-income workers. It can reduce the amount of tax owed and, in many cases, result in a larger refund.

Who qualifies for the EITC?

To qualify, you must:

Have earned income from wages, self-employment, or certain disability benefits.
Meet income limits (which change yearly).
Have a valid Social Security number.
Be a U.S. citizen or resident alien for the entire tax year.
Not have excessive investment income (for 2024, this limit is US$11,600).

How much can you get from the EITC in 2024?

The amount depends on your income and number of children.

Maximum EITC Amounts for 2024

No children: Up to US$632
One child: Up to US$4,213
Two children: Up to US$6,960
Three or more children: Up to US$7,830

What are the 2024 income limits for the EITC?

Your earned income must be below certain limits. Here are the income limits for single filers:

No children: Up to US$18,591
One child: Up to US$49,084
Two children: Up to US$55,768
Three or more children: Up to US$59,899

For married couples filing jointly, the limits are slightly higher.

Can US expats claim the EITC?

US expats living abroad usually cannot claim the EITC unless they have earned income in the US and meet residency requirements. If you claim the Foreign Earned Income Exclusion (FEIE), you are not eligible for the EITC.

What if you missed claiming the EITC?

If you were eligible for the EITC in previous years but didn’t claim it, you can file an amended return (Form 1040-X) within three years to get the credit.

Who can claim the Qualified Business Income Deduction?

The Qualified Business Income (QBI) Deduction is a tax break that allows eligible business owners to deduct up to 20% of their business income on their tax return.

This deduction is available to self-employed individuals and owners of pass-through businesses, which include:

Sole proprietorships
Partnerships
S corporations
Certain LLCs

It does not apply to C corporations.

What are the income limits for the QBI Deduction?

For 2024, the deduction amount starts to phase out for those with taxable income above:

US$191,950 for single filers
US$383,901 for married couples filing jointly

If your income is below these amounts, you generally qualify for the full 20% deduction. If your income is higher, special rules apply that may limit or eliminate the deduction.

How is the QBI Deduction calculated?

The QBI deduction is based on net business income—what you earn after business expenses. It is usually 20% of that amount, but there are limits:

The deduction cannot exceed 50% of W-2 wages paid by the business OR
25% of W-2 wages plus 2.5% of business property value

For example, if your business makes US$100,000 in profit and pays US$30,000 in wages, your deduction is based on the lower of US$20,000 (20% of US$100,000) or US$15,000 (50% of wages).

How did the Tax Cuts and Jobs Act affect the QBI Deduction?

The Tax Cuts and Jobs Act (TCJA) of 2017 introduced the QBI deduction to help business owners lower their taxes. However, this deduction will expire after 2025 unless Congress renews it.

Do state taxes affect the QBI Deduction?

The QBI deduction only applies to federal income taxes. Some states allow it, but others do not. If you live in a state with state income tax, it’s best to check whether it recognizes this deduction.

Can I claim the QBI Deduction with other tax breaks?

Yes. You can still claim deductions for business expenses, self-employed retirement contributions, and healthcare costs.

The QBI deduction is separate from tax credits, which directly reduces the amount of tax you owe.

What if my income exceeds the limit?

If your income is above the threshold, the rules depend on what type of business you own:

If you run a professional service business (law firm, medical practice, consulting), your deduction may be reduced or eliminated.
If you own a non-service business, the deduction is based on W-2 wages paid or business property values.

How can I maximize my QBI Deduction?

To get the most from this deduction, consider:

Keeping taxable income below the phase-out limit
Ensuring your business pays W-2 wages if needed to qualify
Consulting a tax professional to plan around the rules

What steps can help simplify tax filing?

Keep records organized: Maintain receipts, pay stubs, and tax-related documents.
File early: Avoid last-minute stress and potential penalties.
Seek professional help: A tax advisor can ensure compliance and maximize tax savings.
Double-check for mistakes: Errors in filing can lead to delays or IRS audits.

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