United States

The United States levies tax on its citizens and residents on their worldwide income. Non-resident aliens are taxed on their US-source income and income effectively connected with a US trade or business (with certain exceptions).

Personal income tax rates

For individuals, the top federal income tax rate for 2025 is 37%, except for long-term capital gains and qualified dividends (discussed below).

OBBBA makes the income tax rates and brackets established by TCJA permanent. In addition, all brackets continue to be indexed for inflation, including an additional year of inflation adjustments for the 10% and 12% brackets. The changes are effective for tax years beginning after 31 December 2025.

2025 income tax rates and brackets

Single taxpayers (1)

Married taxpayers filing jointly (1, 2)

Head-of-household taxpayers (1, 2)

Married taxpayers filing separately (1)

Notes

1. The maximum federal income tax rate on 'qualified dividends' received from a domestic corporation is 20%. The maximum federal tax rate on capital gains is 20% for assets held for more than 12 months (with certain exceptions). The graduated rates of tax apply to capital gains from assets held for 12 months or less.
2. Non-resident aliens may not take advantage of head of household status or joint return rates.

Alternative minimum tax (AMT)

In lieu of the tax computed using the above rates, the individual AMT may be imposed under a two-tier rate structure of 26% and 28%. For tax year 2025, the 28% tax rate applies to taxpayers with taxable incomes above USD 239,100  (USD 119,550  for married individuals filing separately).  

For 2025, the AMT exemption amount is USD 137,000 for married taxpayers filing a joint return (half this amount for married taxpayers filing a separate return) and USD 88,100 for all other taxpayers (other than estates and trusts), and the phase-out thresholds are USD 1,252,700 for married taxpayers filing a joint return and USD 626,350 for all other taxpayers (other than estates and trusts). Under OBBBA, such exemption amounts are permanent, but starting in 2026, the phase-out thresholds are reduced to 2018 levels (USD 1,000,000 for joint filers and USD 500,000 for married filing separate.) OBBBA also increases the phaseout of the AMT exemption from 25% to 50% when a taxpayer’s alternative minimum taxable income exceeds the phaseout threshold. 

The AMT is payable only to the extent it exceeds the regular net tax liability. The foreign tax credit is available for determining AMT liability to the extent of the foreign tax on the foreign-source AMT income (AMTI), subject to certain limitations. 

AMTI generally is computed by starting with regular taxable income, adding tax preference deductions (claimed in the computation of regular taxable income), and making special adjustments to some of the tax items that were used to calculate taxable income. For example, the taxpayer must add back all state and local income taxes deducted in computing regular taxable income. 

For non-resident aliens with a net gain from the sale of US real property interests, the AMT is calculated on the lesser of AMTI (before the exemption) or the net gain from the sale of the US real property interest.

Medicare contribution tax

A 3.8% 'unearned income Medicare contribution' tax applies on the lesser of (i) the taxpayer's net investment income for the tax year or (ii) the taxpayer's excess modified adjusted gross income over a threshold amount (generally, USD 200,000 for single taxpayers and heads of households, USD 250,000 for a married couple filing a joint return and surviving spouses, and USD 125,000 for a married individual filing a separate return). 

The tax, which is in addition to the regular income tax liability, applies to all individuals subject to US taxation other than non-resident aliens. Net investment income generally includes non-business income from interest, dividends, annuities, royalties, and rents; income from a trade or business of trading financial instruments or commodities; income from a passive-activity trade or business; and net gain from the disposition of non-business property.

State and local income taxes

Most states, and a number of municipal authorities, impose income taxes on individuals working or residing within their jurisdictions. Most of the 50 states impose some personal income tax, with the exception of Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, and Wyoming, which have no state income tax (note that New Hampshire and Tennessee previously taxed interest and dividend income). 

Washington has no income tax, but levies an excise tax on long-term capital gains. Few states impose an income tax at rates that exceed 10%.