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The Average Income Tax Payment in America

Average Income Tax Payment in America
Written by Jennifer Shields

Although it seems that covid-19 infections are diminishing, the aftermath of the pandemic is still going strong. Taxpayers are pinching pennies in all areas as they try to recover what they’ve lost. With this in mind, it’s natural to be curious about the average income tax payment in America. Most of us want to pay our fair share, but certainly no more. So, we decided to do a bit of digging to find out what that is.

With so many categories of taxpayers, it’s important to point out that we are specifically discussing W2 employees. Small businesses, 1099, and corporations are not included in this article. Read further to gain a better understanding of what other W2 Americans pay at tax time.

The Average Income Tax Payment Includes Other Taxes

Income tax isn’t the only tax your employer withholds from your paycheck. The Federal Contributions Act (FICA) mandates that they withhold two additional taxes. The FICA tax rate is 6.2 percent for a social security fund and 1.45 percent for a Medicare fund. Additionally, your employer matches these percentages on your behalf as their employee.

The Social Security Administration explains FICA taxes further. “The money you pay in taxes is not held in a personal account for you to use when you get benefits. Today’s workers help pay for current retirees’ and other beneficiaries’ benefits. Any unused money goes to the Social Security trust funds to help secure today and tomorrow for you and your family.”

Payroll deductions like these and others can affect how one calculates the average income tax payment.  For example, according to Business Insider, 153 million Americans paid an average of $15,322 in 2018. They also offer a caveat to clarify what they considered when calculating the average. “That figure is an average, a measure which is easily skewed by outliers, including about 22,000 returns of people who took home more than $10 million in 2019, for example.”

Lastly, we need to point out that there are other attributes that can alter the calculations of the average income tax payment. For instance, some deductions may come before taxes and others after.

How Much is a Taxpayer’s Average Income Tax Payment?

For the purposes of this article, we’d like to note that the below figures include income tax, state taxes, FICA taxes, and a rough estimate of additional local taxes. Additionally, in an effort to discuss a meaningful average, we chose two articles from the same reputable source.

            2019

Due to the pandemic, the IRS extended the deadline for filing taxes to July 15, with extensions through October 15. Therefore, the Internal Revenue Service (IRS) won’t have statistics available until early next year. While that may have an impact on the average income tax payment, the IRS doesn’t have the information available yet. For the purpose of this article, we’ll discuss the previous two years instead: 2017 and 2018.

            2018 – $13,155 (Motley Fool)

2018 was the first year after President Trump implemented his Tax Cuts and Jobs Act. Many middle-class taxpayers saw lower tax rates when filing their returns. The Tax Cuts and Jobs Act featured a higher tax credit, lower marginal tax rates, and a simplification of the higher standard reduction. While lower-class taxpayers may not have seen much benefit from the new Act, it made a difference overall in the average income tax payment.

           2017 $14,654 (Motley Fool)

Motley Fool admits that they based their 2017 calculations on 2016 information. They explain why by saying, “There weren’t many significant tax changes for 2017 and wage growth was about 2.5 percent over 2017, so it’s reasonable to expect 2017’s average taxes to increase slightly.”

How Will the Pandemic Impact the Average Income Tax Payment?

The IRS gave taxpayers some leeway with their taxes in March. Firstly, they returned some of your taxes in the form of a stimulus payment. Additionally, they’ve extended the filing deadline to July 30. If you filed for an automatic deadline extension, you have until October 15 to file. These pandemic relief efforts make it difficult to predict how they will affect the average income tax payment.

If you think you might be paying more than your fair share of taxes, you may be able to recover your overpayment with an amended tax return. Other remedies may be available to you, as well. Browse our website for a tax professional near you.

Sources

[1] Feroldi, Brian. “How Much Does the Average American Pay in Taxes?” The Motley Fool, The Motley Fool, 14 Mar. 2017, http://www.fool.com/taxes/2017/03/14/how-much-does-the-average-american-pay-in-taxes.aspx.

[2] Frankel, Matthew. “How Much Does the Average American Pay in Taxes?” The Motley Fool, The Motley Fool, 22 Apr. 2018, www.fool.com/taxes/2018/04/22/how-much-does-the-average-american-pay-in-taxes.aspx.

[3] Frankel, Matthew. “Your Complete Guide to the 2018 Tax Changes.” The Motley Fool, The Motley Fool, 29 Dec. 2017, www.fool.com/taxes/2017/12/29/your-complete-guide-to-the-2018-tax-changes.aspx.

[4] Knueven, Liz. “The Average Amount Americans Pay in Federal Income Taxes, by Income Level.” Business Insider, Business Insider, 28 Sept. 2020, www.businessinsider.com/personal-finance/average-federal-income-tax-payment-by-income.

[5] “What Is FICA?” Socialsecurity.gov, Mar. 2017.

About the author

Jennifer Shields

Jennifer Shields is a previously licensed tax preparer with eight years of real-world experience. As a journalism major, she left her position as a tax preparer to pen straightforward tax information for consumers. After all, even Albert Einstein said, “The hardest thing in the world to understand is the income tax.” She strives to break it down into small, digestible bites for the common taxpayer.

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