The highest federal income tax bracket in the United States is 37%. For the 2026 tax year, this rate applies to single filers with taxable income above $640,600 and married couples filing jointly with taxable income above $768,700. Only the income that exceeds those thresholds is taxed at 37%, not your entire earnings.
How the 37% Rate Actually Works
The U.S. uses a progressive tax system, meaning your income is divided into layers, and each layer is taxed at a different rate. The federal system has seven brackets: 10%, 12%, 22%, 24%, 32%, 35%, and 37%. Everyone pays 10% on the first chunk of income, regardless of how much they earn. The 37% rate only kicks in on the portion of taxable income that crosses the top threshold.
This distinction matters because it changes the real math dramatically. A single filer earning $700,000 in taxable income does not owe 37% on the full amount. They owe 37% only on the $59,400 that sits above the $640,600 threshold. Everything below that is taxed at the lower rates that apply to each bracket beneath it. The result is an effective tax rate, the percentage of total income actually paid in taxes, that’s well below 37% for virtually everyone in the top bracket.
The 2026 Income Thresholds
The IRS adjusts bracket thresholds each year based on inflation, so the exact income cutoff for the 37% rate shifts slightly from year to year. For tax year 2026, the top bracket begins at:
- Single filers: taxable income above $640,600
- Married filing jointly: taxable income above $768,700
Taxable income is what remains after you subtract deductions from your gross income. So a single filer who earns $700,000 but takes $30,000 in deductions has taxable income of $670,000, and only $29,400 of that falls into the 37% bracket.
Additional Taxes on High Earners
The 37% bracket is the highest rate on ordinary income, but it’s not the only tax that applies at high income levels. Two additional levies can push the total federal rate higher.
The Additional Medicare Tax adds 0.9% on earned income (wages, salaries, self-employment income) above $200,000 for single filers or $250,000 for married couples filing jointly. This is on top of the standard 1.45% Medicare tax, bringing the combined Medicare rate to 2.35% on earnings above those thresholds.
The Net Investment Income Tax (NIIT) adds 3.8% on investment income, which includes interest, dividends, capital gains, rental income, and royalties. It applies when your modified adjusted gross income exceeds $200,000 for single filers or $250,000 for married couples filing jointly. For a high earner with significant investment income, the NIIT can push the effective federal rate on that investment income well above the nominal bracket rate.
Combined, someone in the top bracket with substantial investment income could face a marginal federal rate of 40.8% on that income: the 37% ordinary rate plus the 3.8% NIIT. On earned income, the combined rate reaches 37.9% when the Additional Medicare Tax is factored in.
Capital Gains Face a Different Top Rate
Long-term capital gains, profits from selling assets held longer than one year, are taxed under a separate rate structure. The maximum rate on most long-term capital gains is 20%, which applies to single filers with taxable income above roughly $533,400 and married couples filing jointly above about $600,050 (based on 2025 thresholds, with inflation adjustments for future years).
Certain types of gains carry higher rates. Profits from selling collectibles like art, coins, or antiques are taxed at a maximum of 28%. The same 28% ceiling applies to gains from qualified small business stock under Section 1202. And when you sell real estate that has been depreciated, a portion of the gain can be taxed at up to 25%.
The 3.8% NIIT applies on top of these capital gains rates for high earners, bringing the maximum effective federal rate on most long-term capital gains to 23.8%.
State Taxes Add Another Layer
The 37% rate is the federal number only. Most states impose their own income tax, with top rates ranging from under 3% to over 13%. A handful of states have no income tax at all. When state taxes are layered on top of federal, residents of high-tax states can face combined marginal rates above 50% on their highest-bracket income. Your total tax burden depends heavily on where you live.
How the 37% Rate Came About
The 37% top rate was established by the Tax Cuts and Jobs Act (TCJA) of 2017, which lowered it from 39.6%. Most of the TCJA’s individual tax provisions were originally set to expire at the end of 2025, which would have pushed the top rate back to 39.6%. However, legislation signed in 2025 extended these provisions, keeping the 37% top rate in place for tax year 2026. Future legislative action could change the rate again, but for now, 37% remains the ceiling on ordinary federal income tax.