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How Much Does An Average American Pay in Taxes?

A variety of tax returns are filed each year, totaling nearly 50 million returns (as of Feb, 2015). To prepare those returns, individual taxpayers spent 3.8 billion hours (2009), according to the National Taxpayers Union. This hard work pays off when taxpayers receive their tax refunds.

how much taxes do I payThe average refund amount is $3,120, says the IRS, and almost 83% of the returns filed resulted in a refund. But how much does an average American pay in taxes? The Motley Fool shares:

“Here’s what the average American pays in federal taxes
“But what you could wind up paying in taxes could differ greatly from the person sitting or standing next to you. Progressive federal income tax brackets, of which there are currently seven ranging from a low of 10% to a high of 39.6%, payroll taxes, and deductions/credits can vastly alter what a taxpayer ultimately pays in federal income taxes.

“With this tax diversity in mind, the Tax Policy Center (TPC) released data last summer on exactly how much the average American taxpayer forks over in federal income taxes. The results might surprise you a bit.

“Based on the TPC’s findings, the average American will owe 19.8% of their income in federal taxes (based on 2015 filings). From this figure, TPC broke out five specific components:

  • Individual income taxes: 9.5%
  • Payroll taxes: 6.9%
  • Corporate income taxes: 2.4%
  • Excise taxes: 0.8%
  • Estate taxes: 0.1%

“Points to keep in mind
“A few quick things to note from the above data. First, the data doesn’t add to 19.8% due to rounding. But, more importantly, state and local taxes aren’t included in the TPC’s estimates, and for those of you living in states like California or New York, as an example, you know full-well how state income taxes and local taxes can affect your effective tax rate.

“As you’ll note from the above, individual income taxes, which take into account your effective federal income tax rate following deductions and credits, and payroll taxes, which include taxes taken out to pay for Social Security and Medicare, account for 83% of what the average American will owe in 2015. If there’s any solace here to the above figures, it’s that an individual income tax rate of 9.5% implies that deductions and credits are substantially lowering most taxpayers’ effective tax rate.”

To more accurately determine what you can expect to owe in taxes, The Motley Fool shares the average tax rate by income level:

“Chart by author. Data source: Tax Policy Center.”

By using various tax saving vehicles, taxpayers can lower their effective tax rate. Charitable donations, maxing out retirement funds, and investing in tax-saving accounts are top ways to save more.