Find Out How Your Income – and Your Tax Burden – Compares to Others
Earlier this year, Kiplinger released a tax burden calculator designed to show each of us how we compare to other Americans in terms of adjusted gross income and the amount of taxes we pay.
For example, in 2017 my adjusted gross income was $ 41,580. Throw this into Kiplinger’s calculator and I find out this:
- I am among the 50% richest people in the United States.
- The richest 50% pay 97.2% of the total federal income tax.
- The richest 50% of people pay a total of $ 1.4 trillion in federal income taxes.
I also learned that, according to Kiplinger, you only need to earn $ 40,078 to be considered part of the top 50 percent earned. The calculator does not distinguish between individual filing and marital filing separately and married filing together, so those of us who earn more than $ 40,000 may also be in the top 50% earning households , which is disappointing.
(For reference: the federal poverty line for a single family is currently $ 12,490; for a family of four, $ 25,700).
If you want to know what it takes to join 1%, Kiplinger breaks it down :
The latest IRS data, based on 2016 tax filings, shows what it takes to make it to the top 1% of income recipients: at least $ 480,804 in adjusted gross income. That’s $ 126 less than it took to acquire this rare status a year earlier. The 1.4 million returns reporting this elite income status accounted for 19.7% of the total adjusted gross income recorded on 2016 returns.
Right. One percent of taxpayers reported a fifth of all income. And that same tiny group contributed nearly 37% of all federal income taxes paid.
In other words, the top 1 percent brings in 19.7% of all income and pays 37% of all federal income taxes. Of course, there can be a significant difference between “earned” and “reported” income as various tax scandal news continues to remind us. There are also many perfectly legal tax optimization techniques out there if you want to know how to reduce the overall tax burden – and many first percentages use tax optimization as one of their wealth-building strategies.
There is also a huge difference between gross income and adjusted gross income, especially if you are self-employed; my 2017 gross income, for example, was $ 66,224, but my adjusted gross income was $ 41,580 and my taxable income after deductions / exemptions fell to $ 31,180. That year, my total federal tax burden, including regular and self-employment taxes, was $ 11,889.
That said, if you’re wondering if the top 1 percent is paying their fair share in taxes or if you’re paying more than your fair share, Kiplinger’s calculator gives us at least some perspective, albeit a generalized one.
Where do you fall when you put your AGI in a calculator? Did you expect this, or did the numbers surprise you?