OVERVIEW OF THE FEDERAL TAX SYSTEM

AS IN EFFECT FOR 2018

Prepared by the Staff

of the

JOINT COMMITTEE ON TAXATION

February 7, 2018

JCX-3-18
i

CONTENTS

Page

INTRODUCTION .......................................................................................................................... 1

I. SUMMARY OF PRESENT-LAW FEDERAL TAX SYSTEM........................................... 3

A. Individual Income Tax..................................................................................................... 3

B. Corporate Income Tax ................................................................................................... 12

C. Estate, Gift and Generation-Skipping Transfer Taxes................................................... 18

D. Social Insurance Taxes .................................................................................................. 20

E. Major Excise Taxes........................................................................................................ 22

APPENDIX: FIGURES AND TABLES ..................................................................................... 24
1

INTRODUCTION

This document,1 prepared by the staff of the Joint Committee on Taxation (“Joint 

Committee staff”), provides a summary of the present-law Federal tax system as in effect for 

2018. 

The current Federal tax system has four main elements: (1) an income tax on individuals 

and corporations (which consists of both a “regular” income tax and, in the case of individuals, 

an alternative minimum tax);2 (2) payroll taxes on wages (and corresponding taxes on selfemployment income) to finance certain social insurance programs; (3) estate, gift, and 

generation-skipping transfer taxes; and (4) excise taxes on selected goods and services. This 

document provides a broad overview of each of these elements. 

A number of aspects of the Internal Revenue Code of 1986 (the “Code”), are subject to 

change over time. For example, some dollar amounts and income thresholds are indexed for 

inflation, including the standard deduction, tax rate brackets, and the annual gift tax exclusion. 

In general, the Internal Revenue Service (“IRS”) adjusts these numbers annually and publishes 

the inflation-adjusted amounts in effect for tax years beginning in a calendar year before the 

beginning of that year. However the IRS publication for 2018 (Rev. Proc. 2017-58) is out of 

date3 due to the December 2017 passage of Public Law No. 115-97, An Act to Provide for 

Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal 

Year 2018, often referred to as the Tax Cuts and Jobs Act (“TCJA”).

4

 Where applicable, this 

document generally includes actual or estimated5 dollar amounts in effect for 2018 and notes 

whether dollar amounts are indexed for inflation.6

 1

 This document may be cited as follows: Joint Committee on Taxation, Overview of the Federal Tax 

System as in Effect for 2018 (JCX-3-18), February 7, 2018. This document can be found on the Joint Committee on 

Taxation website at www.jct.gov. 

2

 If certain requirements are met, certain entities or organizations are exempt from Federal income tax. A 

description of such organizations is beyond the scope of this document. For a recent description, see Joint 

Committee on Taxation, Report to the House Committee on Ways and Means on Present Law and Suggestions for 

Reform Submitted to the Tax Reform Working Groups (JCS-3-13), May 6, 2013, pp. 19-58. 

3

 2017-45 I.R.B. 489.

4

 The amounts in Rev. Proc. 2017-58 were calculated solely using the Consumer Price Index for All Urban 

Consumers (“CPI-U”) and the TCJA requires that the Chained Consumer Price Index for All Urban Consumers (“CCPI-U”) generally be used for 2018 amounts and going forward. See article “Inflation Figures Being Recalculated, 

Treasury Official Confirms” dated January 29, 2018, in Tax Notes Today (Doc 2018-4576, 2018 TNT 19-9), 

wherein a representative from Treasury confirmed that the amounts listed in Rev. Proc. 2017-58 will be recalculated 

as a result of provisions in TCJA.

5

 Joint Committee staff calculations of 2018 values are labeled as such.

6

 Generally, parameters in the Code are indexed for inflation by applying the CPI-U up to 2017 values and 

the C-CPI-U for years thereafter. For example, the 2016 value for a statutory amount written into the Code in 2015 

and indexed for inflation starting in 2016 is calculated using one year of CPI-U growth (from 2014 to 2015), the 
2

In addition, a number of the provisions in the Federal tax laws have parameters that vary 

by statute from year to year or have been enacted on a temporary basis, including many from the 

TCJA. For simplicity, this document describes the Federal tax laws in effect for 2018 and 

generally does not include references to provisions as they may be in effect for future years or to 

termination dates for expiring provisions.7

 

 2017 value is calculated using two years of CPI-U growth (from 2014 to 2016), and the 2018 value is calculated by 

using two years of CPI-U growth (from 2014 to 2016) and one year of C-CPI-U growth (from 2016 to 2017).

7

 See Joint Committee on Taxation, List of Expiring Federal Tax Provisions 2016-2027 (JCX-1-18), 

January 9, 2018. 
3

I. SUMMARY OF PRESENT-LAW FEDERAL TAX SYSTEM

A. Individual Income Tax

In general

A United States citizen or resident alien generally is subject to the U.S. individual income 

tax on his or her worldwide taxable income.8 Taxable income equals the taxpayer’s total gross 

income less certain exclusions, exemptions, and deductions. Graduated tax rates are then applied 

to a taxpayer’s taxable income to determine his or her individual income tax liability. A 

taxpayer may face additional liability if the alternative minimum tax applies. A taxpayer may 

reduce his or her income tax liability by any applicable tax credits.

Adjusted gross income

Under the Code, gross income means “income from whatever source derived” except for 

certain items specifically exempt or excluded by statute.9

 Sources of income include 

compensation for services, interest, dividends, capital gains, rents, royalties, alimony and 

separate maintenance payments, annuities, income from life insurance and endowment contracts 

(other than certain death benefits), pensions, gross profits from a trade or business, income in 

respect of a decedent, and income from S corporations, partnerships,10 estates or trusts.

11 

Statutory exclusions from gross income include death benefits payable under a life insurance 

contract, interest on certain State and local bonds, the receipt of property by gift or inheritance, 

as well as employer-provided health insurance, pension contributions, and certain other benefits.

 8

 Foreign tax credits generally are available against U.S. income tax imposed on foreign source income to 

the extent of foreign income taxes paid on that income. A nonresident alien generally is subject to the U.S. 

individual income tax only on income with a sufficient nexus to the United States. A U.S. citizen or resident who 

satisfies certain requirements for presence in a foreign country also is allowed a limited exclusion ($103,900 in 

2018, Joint Committee staff calculation) for foreign earned income and a limited exclusion of employer-provided 

housing costs. Sec. 911.

9

 Sec. 61.

10 In general, partnerships and S corporations (i.e., corporations subject to the provisions of subchapter S of 

the Code) are treated as pass-through entities for Federal income tax purposes. Thus, no Federal income tax is 

imposed at the entity level. Rather, income of such entities is passed through and taxed to the owners at the 

individual level. A business entity organized as a limited liability company (“LLC”) under applicable State law 

generally is treated as a partnership for Federal income tax purposes if it has two or more members; a single-member 

LLC generally is disregarded as an entity separate from its owner for Federal income tax purposes.

11 In general, estates and most trusts pay tax on income at the entity level, unless the income is distributed 

or required to be distributed under governing law or under the terms of the governing instrument. Such entities 

determine their tax liability using a special tax rate schedule and are subject to the alternative minimum tax. Certain 

trusts, however, do not pay Federal income tax at the trust level. For example, certain trusts that distribute all 

income currently to beneficiaries are treated as pass-through or conduit entities (similar to a partnership). Other 

trusts are treated as being owned by grantors in whole or in part for tax purposes; in such cases, the grantors are 

taxed on the income of the trust.
4

An individual’s adjusted gross income (“AGI”) is determined by subtracting certain 

“above-the-line” deductions from gross income. These deductions include trade or business 

expenses, capital losses, contributions to a qualified retirement plan by a self-employed 

individual, contributions to certain individual retirement accounts (“IRAs”), certain moving 

expenses for members of the armed forces, certain education-related expenses, and alimony 

payments.12

Taxable income

In general

To determine taxable income, an individual reduces AGI by the applicable standard 

deduction or his or her itemized deductions,13 and by the deduction for qualified business 

income.

A taxpayer may reduce AGI by the amount of the applicable standard deduction to arrive 

at taxable income. The basic standard deduction varies depending on a taxpayer’s filing status. 

For 2018, the amount of the standard deduction is $12,000 for a single individual and for a 

married individual filing separately, $18,000 for a head of household, and $24,000 for a married 

individual filing jointly and for a surviving spouse. An additional standard deduction is allowed 

with respect to any individual who is elderly (i.e., above age 64) or blind.14 The amounts of the 

basic standard deduction and the additional standard deductions are indexed annually for 

inflation.

In lieu of taking the applicable standard deductions, an individual may elect to itemize 

deductions. The deductions that may be itemized include State and local taxes (up to $10,000 

annually ($5,000 for married taxpayers filing separately), in aggregate of income or sales taxes, 

real property taxes, and certain personal property taxes), home mortgage interest, charitable 

contributions, certain investment interest, medical expenses (in excess of 7.5 percent of AGI), 

and casualty and theft losses attributable to Federally declared disasters (in excess of 10 percent

of AGI and in excess of $100 per loss).

15

The Joint Committee staff estimates that for the 2018 tax year approximately 135.2 

million taxpayers will claim the standard deduction while 20.4 million taxpayers will elect to 

itemize deductions.

 12 Sec. 62.

13 Sec. 63.

14 For 2018, by Joint Committee staff calculations, the additional amount is $1,300 for married taxpayers 

(for each spouse meeting the applicable criterion) and surviving spouses. The additional amount for single 

individuals and heads of households is $1,600. If an individual is both elderly and blind, the individual is entitled to 

two additional standard deductions, for a total additional amount (for 2018) of $2,600 or $3,200, as applicable.

15 Sec 165(h).
5

Deduction for qualified business income

In addition to standard or itemized deductions, an individual taxpayer generally may 

deduct 20 percent of qualified business income from a partnership, S corporation, or sole 

proprietorship, as well as 20 percent of aggregate qualified Real Estate Investment Trust 

(“REIT”) dividends, qualified publicly traded partnership income, and qualified cooperative 

dividends in computing taxable income.16 For taxpayers with taxable income17 in excess of the

threshold amount ($315,000 for married taxpayers filing joint returns and $157,500 for all other 

taxpayers), the deduction with respect to qualified business income is limited based on (1) the 

taxpayer’s allocable share of W-2 wages paid by the trade or business and the taxpayer’s

allocable share of capital investment with respect to the trade or business18 and (2) the type of 

trade or business in which the income is earned.19 These limitations begin to phase in above the

threshold amount of taxable income.

20 In addition, the deduction calculated with respect to 

qualified business income, qualified REIT dividends, and qualified publicly traded partnership 

income may not exceed 20 percent of the taxpayer’s taxable income for the taxpayer year 

(reduced by net capital gain and qualified cooperative dividends). The 20 percent deduction with 

respect to qualified cooperative dividends is limited to taxable income (reduced by net capital 

gain) for the taxable year.

Tax liability

In general

A taxpayer’s net income tax liability is the greater of (1) regular individual income tax 

liability reduced by credits allowed against the regular tax, or (2) tentative minimum tax reduced 

by credits allowed against the minimum tax. The amount of income subject to tax is determined 

differently under the regular tax and the alternative minimum tax, and separate rate schedules 

 16 Sec. 199A. The total of these amounts may not exceed the taxpayer’s taxable income for the taxable 

year (reduced by net capital gain). Additionally, special rules apply to specified agricultural or horticultural 

cooperatives and trusts and estates.

17 Taxable income is computed without regard to the deduction allowable under section 199A with respect 

to the threshold amount.

18 The deduction is limited to the greater of (a) 50 percent of the W-2 wages paid with respect to the 

qualified trade or business, or (b) the sum of 25 percent of the W-2 wages with respect to the qualified trade or 

business plus 2.5 percent of the unadjusted basis, immediately after acquisition, of all qualified property. Sec. 

199A(b)(2)(B).

19 Qualified business income excludes income from a specified service trade or business or from the trade 

or business of performing services as an employee. Sec. 199A(d)(1). A specified service trade or business means 

any trade or business involving the performance of services in the fields of health, law, accounting, actuarial science, 

performing arts, consulting, athletics, financial services, brokerage services, or any trade or business where the 

principal asset of such trade or business is the reputation or skill of one or more of its employees or owners, or 

which involves the performance of services that consist of investing and investment management, trading, or dealing 

in securities, partnership interests, or commodities. Sec. 199A(d)(2).

20 Taxable income is computed without regard to the deduction allowable under section 199A with respect 

to the threshold amount.
6

apply. Lower rates apply for long-term capital gains and certain dividends; those rates apply for 

both the regular tax and the alternative minimum tax.

Regular tax liability

To determine regular tax liability, a taxpayer generally must apply the tax rate schedules 

(or the tax tables) to his or her regular taxable income. The rate schedules are broken into several 

ranges of income, known as income brackets, with the marginal tax rate increasing as a 

taxpayer’s income increases. Separate rate schedules apply based on an individual’s filing 

status. For 2018, the regular individual income tax rate schedules are as follows:

Table 1.─Federal Individual Income Tax Rates for 2018

If taxable income is: Then income tax equals:

Single Individuals

Not over $9,525 10% of the taxable income

Over $9,525 but not over $38,700 $952.50 plus 12% of the excess over $9,525

Over $38,700 but not over $82,500 $4,453.50 plus 22% of the excess over $38,700

Over $82,500 but not over $157,500 $14,089.50 plus 24% of the excess over $82,500

Over $157,500 but not over $200,000 $32,089.50 plus 32% of the excess over $157,500

Over $200,000 but not over $500,000 $45,689.50 plus 35% of the excess over $200,000

Over $500,000 $150,689.50 plus 37% of the excess over $500,000

Heads of Households

Not over $13,600 10% of the taxable income

Over $13,600 but not over $51,800 $1,360 plus 12% of the excess over $13,600

Over $51,800 but not over $82,500 $5,944 plus 22% of the excess over $51,800

Over $82,500 but not over $157,500 $12,698 plus 24% of the excess over $82,500

Over $157,500 but not over $200,000 $30,698 plus 32% of the excess over $157,500

Over $200,000 but not over $500,000 $44,298 plus 35% of the excess over $200,000

Over $500,000 $149,298 plus 37% of the excess over $500,000

Married Individuals Filing Joint Returns and Surviving Spouses

Not over $19,050 10% of the taxable income

Over $19,050 but not over $77,400 $1,905 plus 12% of the excess over $19,050

Over $77,400 but not over $165,000 $8,907 plus 22% of the excess over $77,400

Over $165,000 but not over $315,000 $28,179 plus 24% of the excess over $165,000
7

If taxable income is: Then income tax equals:

Over $315,000 but not over $400,000 $64,179 plus 32% of the excess over $315,000

Over $400,000 but not over $600,000 $91,379 plus 35% of the excess over $400,000

Over $600,000 $161,379 plus 37% of the excess over $600,000

Married Individuals Filing Separate Returns

Not over $9,525 10% of the taxable income

Over $9,525 but not over $38,700 $952.50 plus 12% of the excess over $9,525

Over $38,700 but not over $82,500 $4,453.50 plus 22% of the excess over $38,700

Over $82,500 but not over $157,500 $14,089.50 plus 24% of the excess over $82,500

Over $157,500 but not over $200,000 $32,089.50 plus 32% of the excess over $157,500

Over $200,000 but not over $300,000 $45,689.50 plus 35% of the excess over $200,000

Over $300,000 $80,689.50 plus 37% of the excess over $300,000

Estates and Trusts

Not over $2,550 10% of the taxable income

Over $2,550 but not over $9,150 $255 plus 24% of the excess over $2,550

Over $9,150 but not over $12,500 $1,839 plus 35% of the excess over $9,150

Over $12,500 $3,011.50 plus 37% of the excess over $12,500

An individual’s effective marginal tax rate may be reduced by the allowance of the

deduction for qualified business income.

21 Effective marginal tax rates may also be altered by 

the phasein and phaseout of certain exemptions or credits.22

Special capital gains and dividends rates

In general, gain or loss reflected in the value of an asset is not recognized for income tax 

purposes until a taxpayer disposes of the asset. On the sale or exchange of a capital asset, any 

gain generally is included in income. Any net capital gain of an individual is taxed at maximum 

rates lower than the rates applicable to ordinary income. Net capital gain is the excess of the net 

long-term capital gain for the taxable year over the net short-term capital loss for the year. Gain 

 21 Deductions of income amounts can be viewed as substitutes for exemptions or rate reductions for the 

affected income.

22 The Code contains many provisions that may cause effective marginal tax rates to differ from statutory 

marginal rates. For a complete discussion of provisions that have an effect on effective marginal tax rates as applied 

to a prior iteration of the Code see Joint Committee on Taxation, Present Law and Analysis Relating to Individual 

Effective Marginal Tax Rates (JCS-3-98), February 3, 1998.
8

or loss is treated as long-term if the asset is held for more than one year. Qualified dividend

income is generally taxed at the same rate as net capital gains.23

Capital losses generally are deductible in full against capital gains. In addition, 

individual taxpayers may deduct capital losses against up to $3,000 of ordinary income in each 

year. Any remaining unused capital losses may be carried forward indefinitely to another 

taxable year.

A maximum rate applies to certain capital gains and dividends. The maximum rate of tax

on the adjusted net capital gain of an individual depends on the individual’s taxable income and 

filing status. Theses maximum rates apply for purposes of both the regular tax and the 

alternative minimum tax. For 2018, the adjusted net capital gains rate schedules are as follows:

Table 2.─Adjusted Net Capital Gain Maximum Rates for 2018

Filing Status and Rate Start Amount (Taxable Income) Rate

Married Individuals 

Filing Joint Returns and 

Surviving Spouses

Heads of 

Households

Single 

Individuals

Married 

Individuals Filing 

Separate Returns

Estates

and

Trust

$0 $0 $0 $0 $0 0%

$77,200 $51,700 $38,600 $38,600 $2,600 15%

$479,000 $452,400 $425,800 $239,500 $12,700 20%

Net investment income

An additional tax is imposed on net investment income in the case of an individual, 

estate, or trust.24 In the case of an individual, the tax is 3.8 percent of the lesser of net 

investment income or the excess of modified adjusted gross income25 over the threshold amount. 

The threshold amount is $250,000 in the case of a joint return or surviving spouse, $125,000 in 

the case of a married individual filing a separate return, and $200,000 in any other case.26 Thus, 

for taxpayers with modified adjusted gross income in excess of those thresholds, the rate on 

 23 Sec. 1(h).

24 Sec. 1411.

25 Modified adjusted gross income is adjusted gross income increased by the amount excluded from 

income as foreign earned income under section 911(a)(1) (net of the deductions and exclusions disallowed with 

respect to the foreign earned income).

26 These thresholds are not indexed for inflation.
9

certain capital gains and dividends is 23.8 percent while the maximum rate on other investment 

income, including interest, annuities, royalties, and rents, is 40.8 percent. 

Net investment income is the excess of (1) the sum of (a) gross income from interest, 

dividends, annuities, royalties, and rents, other than such income which is derived in the ordinary 

course of a trade or business that is not a passive activity with respect to the taxpayer or a trade 

or business of trading in financial instruments or commodities, and (b) net gain (to the extent 

taken into account in computing taxable income) attributable to the disposition of property other 

than property held in the active conduct of a trade or business that is not in the trade or business 

of trading in financial instruments or commodities, over (2) deductions properly allocable to such 

gross income or net gain.

The Joint Committee staff estimates that for the 2018 tax year, approximately 4.7 million 

taxpayers will pay the additional tax on net investment income, representing approximately

$27.9 billion in tax revenue. 

Credits against tax

An individual may reduce his or her tax liability by any available tax credits.27 In some 

instances, a permissible credit is “refundable,” that is, if the amount of these credits exceeds tax 

liability (net of other credits), such credits create an overpayment, which may generate a refund. 

Two major refundable credits are the child tax credit and the earned income credit.28

An individual may claim a tax credit for each qualifying child under age 17. The amount 

of the credit per child is $2,000.29 The aggregate amount of child credits that may be claimed is 

phased out for individuals with income over certain threshold amounts. Specifically, the 

otherwise allowable child tax credit is reduced by $50 for each $1,000, or fraction thereof, of 

modified AGI over $400,000 for married individuals filing jointly and $200,000 for all other 

individuals. To the extent the child credit exceeds the taxpayer’s tax liability, the taxpayer is 

eligible for a refundable credit (the additional child tax credit) equal to 15 percent of earned 

income in excess of $2,500,

30 not to exceed $1,400 per child in 2018. The maximum amount of 

the refundable portion of the credit is indexed for inflation.

 27 These personal credits include the child tax credit, earned income tax credit, child and dependent care 

credit, adoption credit, premium tax credit, health coverage tax credit, saver’s credit, foreign tax credit, lifetime 

learning credit, American opportunity tax credit, residential energy efficient property credit (for qualifying solar 

energy property), and credits for the elderly or disabled.

28 Other refundable credits include the American opportunity tax credit, the premium tax credit, and the 

health coverage tax credit.

29 Sec. 24.

30 Families with three or more children may determine the additional child tax credit by taking the greater 

of (1) the earned income formula, or (2) the alternative formula, i.e. the amount by which the taxpayer’s social 

security taxes exceed the taxpayer’s earned income tax credit.
10

For taxpayers with dependents other than qualifying children, such as a 17-year-old child 

living at home, a full-time college student, or other adult member of the household for whom the 

taxpayer provides financial support, taxpayers are able to claim a $500 non-refundable credit.

A refundable earned income tax credit (“EITC”) is available to low-income workers who 

satisfy certain requirements.31 The amount of the EITC varies depending on the taxpayer’s 

earned income and whether the taxpayer has more than two, two, one, or no qualifying children. 

In 2018,

32 the maximum EITC for taxpayers is $6,431 with more than two qualifying children, 

$5,716 with two qualifying children, $3,461 with one qualifying child, and $519 with no 

qualifying children. The credit amount begins to phase out at an income level of $24,350 for 

joint-filers with children, $18,660 for other taxpayers with children, $14,180 for joint-filers with 

no qualifying children, and $8,490 for other taxpayers with no qualifying children. The phaseout percentages are 21.06 for two or more qualifying children, 15.98 for taxpayers with one 

qualifying child, and 7.65 for no qualifying children.

Tax credits are also allowed for certain business expenditures, certain foreign income 

taxes paid or accrued, certain energy conservation expenditures, certain education expenditures, 

certain child care expenditures, certain health care costs, and for certain elderly or disabled 

individuals. The personal credits allowed against the regular tax are generally allowed against 

the alternative minimum tax.

Alternative minimum tax liability

An alternative minimum tax is imposed on an individual, estate, or trust in an amount by 

which the tentative minimum tax exceeds the regular income tax for the taxable year.33 For 

2018, the tentative minimum tax is the sum of (1) 26 percent of so much of the taxable excess as 

does not exceed $191,100 ($95,550 in the case of married filing separately) and (2) 28 percent of 

the remaining taxable excess.34 The taxable excess is so much of the alternative minimum 

taxable income (“AMTI”) as exceeds the exemption amount.35 AMTI is the taxpayer’s taxable 

income increased by the taxpayer’s tax preferences and adjusted by determining the tax 

treatment of certain items in a manner that negates the deferral of income resulting from the 

regular tax treatment of those items.

For tax year 2018, the exemption amount is $109,400 for married individuals filing 

jointly and surviving spouses, $70,300 for other unmarried individuals, $54,700 for married 

 31 Sec. 32. 

32 All 2018 EITC dollar values are Joint Committee staff calculations.

33 Sec. 55.

34 Joint Committee staff calculations. The breakpoint between the 26-percent and 28-percent bracket is 

indexed for inflation. 

35 The maximum tax rates on net capital gain and dividends used in computing the regular tax are used in 

computing the tentative minimum tax.
11

individuals filing separately, and $24,600 for estates or trusts.

36 The exemption amount is

phased out by an amount equal to 25 percent of the amount by which the individual’s AMTI 

exceeds $1,000,000 for married individuals filing jointly and surviving spouses, $500,000 for 

other individuals, and $81,900 for estates or trusts.

37 These amounts are indexed annually for 

inflation.

Among the tax preferences and adjustments included in AMTI are accelerated 

depreciation on certain property used in a trade or business, circulation expenditures, research 

and experimental expenditures, certain expenses and allowances related to oil and gas, certain 

expenses and allowances related to mining exploration and development, certain tax-exempt 

interest income, and a portion of the gain excluded with respect to the sale or disposition of 

certain small business stock. The standard deduction, and certain itemized deductions, such as 

State and local taxes, are not allowed to reduce AMTI.

The Joint Committee staff estimates that for the 2018 tax year, approximately 0.6 million 

taxpayers will pay the alternative minimum tax, representing approximately $9.5 billion in tax 

revenue.

 36 The 2018 value for estates or trusts is a Joint Committee staff calculation. Other AMT exemption 

amount values for 2018 appear in the Code.

37 The 2018 value for estates or trusts is a Joint Committee staff calculation. Other AMT phaseout 

thresholds for 2018 appear in the Code.
12

B. Corporate Income Tax

Taxable income

In general

Corporations organized under the laws of any of the 50 States (and the District of 

Columbia) generally are subject to the U.S. corporate income tax38 on their U.S.-source and 

certain foreign-source income. Under subchapter S of the Code, a qualified small business 

corporation may elect not to be subject to the corporate income tax (i.e., may make an

“S corporation election”). If an S corporation election is made, the income of the corporation 

flows through to the shareholders and is taxable directly to them. 

The taxable income of a corporation generally is its gross income less allowable 

deductions. Gross income generally is income derived from any source, including gross profit 

from the sale of goods and services to customers, rents, royalties, interest (other than interest 

from certain indebtedness issued by State and local governments), dividends, gains from the sale 

of business and investment assets, and other income.

Allowable deductions include ordinary and necessary business expenditures, such as 

salaries, wages, contributions to profit-sharing and pension plans and certain other employee 

benefit programs, repairs, bad debts, taxes (other than Federal income taxes), contributions to 

charitable organizations (subject to an income limitation), advertising, interest expense (subject 

to limitation39), certain losses, selling expenses, and other expenses. A net operating loss 

deduction is allowed.40

Expenditures that produce benefits in future taxable years to a taxpayer’s business or 

income-producing activities (such as the purchase of plant and equipment) generally are 

capitalized and recovered over time through depreciation, amortization, or depletion allowances. 

In some instances taxpayers can recover their costs more quickly than under the general rules. 

An additional first-year depreciation deduction is allowed equal to up to 100 percent of the 

 38 A foreign corporation generally is subject to the U.S. corporate income tax only on income with a 

sufficient nexus to the United States.

39 In the case of any taxpayer for taxable years beginning after 2017, the deduction for business interest is 

limited to the sum of: (1) business interest income; (2) 30 percent of adjusted taxable income; and (3) floor plan 

financing interest. Taxpayers with average annual gross receipts for the three-taxable-year period ending with the 

prior taxable year that do not exceed $25 million and certain regulated public utilities are not subject to this 

limitation. Taxpayers in real property or farming trades or businesses, as defined in section 163(j)(7)(B) and (C), 

may elect not to be subject to the limitation.

40 The TCJA changed the rules governing carrybacks and carryovers of net operating losses, and, for net 

operating losses arising in taxable years beginning after 2017, the net operating loss deduction is limited to 80 

percent of taxable income. Sec. 172.
13

adjusted basis of qualified property.

41 Also, a taxpayer may elect to deduct (or “expense”) up to 

$1 million of the cost of section 179 property placed in service during the taxable year.

42

Deductions are also allowed for certain amounts despite the lack of a direct expenditure 

by the taxpayer. For example, a deduction is allowed for all or a portion of the amount of 

dividends received by a corporation from another corporation (provided certain ownership 

requirements are satisfied).

Certain expenditures may not be deducted, such as dividends paid to shareholders, 

expenses associated with earning tax-exempt income,43 certain meal and entertainment 

expenses,

44 certain qualified transportation fringe and commuter benefits,45 certain executive 

compensation in excess of $1 million per year,46 a portion of the interest on certain high-yield 

debt obligations that resemble equity, as well as fines, penalties, bribes, kickbacks, illegal 

payments, and settlements subject to nondisclosure agreements paid in connection with sexual 

harassment or abuse.

U.S. tax rules applicable to foreign activities of U.S. persons

In general, income earned directly or indirectly by a U.S. corporation from the conduct of 

a foreign business is taxed in the year earned, or not at all. The indirect earnings from a separate 

foreign legal entity—most commonly, a controlled foreign corporation (“CFC”)—operating the 

foreign business are subject to current U.S. tax by reason of subpart F.

47 Dividends received by 

 41 The portion of basis allowable as additional first-year depreciation depends on both the date the 

qualified property is acquired and the year the qualified property is placed in service. Used property acquired in 

arms-length transactions may qualify for the additional first-year depreciation deduction. Generally, property used 

by businesses not subject to the limitation on interest expense (e.g. regulated public utilities and electric 

cooperatives and taxpayers in a trade or business that has had floor plan financing indebtedness) is excluded from 

the definition of qualified property. Sec. 168(k)(9). 

42 This amount is reduced (but not below zero) by the amount by which the cost of qualifying property 

exceeds $2.5 million. Sec. 179.

43 For example, the carrying costs of tax-exempt State and local obligations and the premiums on certain 

life insurance policies are not deductible. 

44 The TCJA changed the rules governing the deductibility of meal and entertainment expenses to 

generally prohibit deductions for entertainment expenses, including meals and other items, activities, and facilities 

that constitute entertainment. A 50% deduction disallowance applies to expenses associated with providing meals 

and facilities that qualify as de minimis under section 132(e), including meals for the convenience of the employer 

under section 119. Sec. 274.

45 The TCJA added rules to disallow deductions to employers for expenses associated with providing 

qualified transportation fringe benefits unless amounts are reported and properly included in employee 

compensation, and to disallow deductions for other commuter benefits generally. Sec. 274.

46 Sec. 162(m). The TCJA substantially expanded the application of this section, including striking the 

exceptions for performance-based compensation and commissions and changing the definitions of covered

employee and publicly held corporation, along with providing a transition rule.

47 Secs. 951-964. A CFC is generally defined as any foreign corporation where U.S. persons own 

(directly, indirectly, or constructively) more than 50 percent of the corporation’s stock (measured by vote or value), 
14

U.S. corporate shareholders from their CFCs are generally eligible for a 100-percent dividendsreceived-deduction.48 However, the United States generally taxes U.S. shareholders of a CFC on 

their pro rata shares of certain passive or highly mobile income, or global intangible low-taxed 

income (“GILTI”), without regard to whether the income is distributed to the shareholders.49 

Corporations are generally allowed a 50-percent deduction on their GILTI.50 A foreign tax 

credit generally is available to offset, in whole or in part, the U.S. tax owed on foreign-source 

income.51

Tax liability

In general

A corporation’s regular income tax liability generally is determined by applying a 21-

percent rate to its taxable income.

In contrast to the treatment of capital gains in the individual income tax, no separate rate 

structure exists for corporate capital gains. A corporation may not deduct the amount of capital 

losses in excess of capital gains for any taxable year. Disallowed capital losses may be carried 

back three years or carried forward five years.

Corporations generally are taxed at lower rates on their foreign-derived intangible income 

(“FDII”).52 The rate reduction is accomplished by the allowance of a 37.5-percent deduction, 

resulting in an effective tax rate of 13.125 percent on FDII.

 

taking into account only those U.S. persons that are within the meaning of the term “United States shareholder,” 

which refers only to those U.S. persons who own at least 10 percent of the stock (measured by vote or value). Secs. 

951(b), 957, and 958.

48 Sec. 245A.

49 Secs. 951-964. GILTI means, with respect to any U.S. shareholder, the excess of its pro rata share of 

certain CFC income over a 10-percent return (reduced by certain interest expense incurred by CFCs) on its pro rata 

share of the aggregate of the average quarterly adjusted bases in certain depreciable tangible property of each CFC 

with respect to which it is a U.S. shareholder.

50 The deduction for GILTI is not available for Regulated Investment Companies (“RIC”) or REITs.

51 Foreign income taxes limited in a tax year may be carried back one year or forward ten years. A 20-

percent foreign tax credit disallowance applies to GILTI. Sec. 951A. Foreign tax credits are not available for 

foreign taxes paid or accrued with respect to dividends qualifying for the 100-percent dividends-received-deduction. 

Sec. 245A.

52 A corporation’s FDII is its deemed intangible income multiplied by the percentage of its income 

(computed with certain exceptions) derived from serving foreign markets. A corporation’s deemed intangible 

income is the excess of its income (computed with certain exceptions) over a 10-percent return on the aggregate of 

its average quarterly adjusted bases in certain depreciable tangible property. The deduction for FDII is not available 

for RICs or REITs. Sec. 250.
15

Like individuals, corporations may reduce their tax liability by any applicable tax 

credits.53 The three largest dollar amount credits are the research credit, the low income housing 

tax credit, and the renewable electricity production credit, which target intangible investment, 

real property investment, and electricity production, respectively.

54

The research credit is generally available with respect to incremental increases in 

qualified research.55 A research tax credit is also available with respect to corporate cash 

expenses paid for basic research conducted by universities (and certain nonprofit scientific 

research organizations) above a certain floor.56 Finally, a research credit is available for a 

taxpayer’s expenditures on research undertaken by an energy research consortium.57

The low-income housing tax credit may be claimed over a 10-year period by owners of 

certain residential rental property for the cost of rental housing occupied by tenants having 

incomes below specified levels.

58 The amount of the credit for any taxable year in the credit 

period is the applicable percentage of the qualified basis of each qualified low-income building. 

The qualified basis of any qualified low-income building for any taxable year equals the 

applicable fraction of the eligible basis of the building. 

An income tax credit is allowed for the production of electricity from qualified energy 

resources at qualified facilities (the “renewable electricity production credit”). Qualified energy 

resources comprise wind, closed-loop biomass, open-loop biomass, geothermal energy, solar 

energy, small irrigation power, municipal solid waste, qualified hydropower production, and 

marine and hydrokinetic renewable energy. Qualified facilities are, generally, facilities that 

generate electricity using qualified energy resources. To be eligible for the credit, electricity 

 53 Business credits also apply to the business income of individuals.

54 See Joint Committee on Taxation, Estimates of Federal Tax Expenditures For Fiscal Years 2016-2020

(JCX-3-17), January 30, 2017.

55 For general research expenditures, a taxpayer may claim a research credit equal to 20 percent of the 

amount by which the taxpayer’s qualified research expenses for a taxable year exceed its base amount for that year. 

Sec. 41(a)(1). An alternative simplified research credit (with a 14 percent rate and a different base amount) may be 

claimed in lieu of this credit. Sec. 41(c)(5).

56 This 20-percent credit is available with respect to the excess of (1) corporate cash expenses (including 

grants or contributions) paid for basic research conducted by universities (and certain nonprofit scientific research 

organizations) over (2) the sum of (a) the greater of two minimum basic research floors plus (b) an amount reflecting 

any decrease in nonresearch giving to universities by the corporation as compared to such giving during a fixed-base 

period adjusted for inflation. Sec. 41(a)(2) and (e).

57 This separate credit computation commonly is referred to as the energy research credit. Unlike the other 

research credits, the energy research credit applies to all qualified expenditures, not just those in excess of a base 

amount. Sec. 41(1)(3).

58 Sec. 42.
16

produced from qualified energy resources at qualified facilities must be sold by the taxpayer to 

an unrelated person.59

In addition there are credits applicable to businesses including investment tax credits 

(applicable to investment in certain renewable energy property and the rehabilitation of certain 

real property), the work opportunity credit (applicable to wages paid to individuals from certain

targeted groups), the employer-provided child care credit (applicable to certain expenditures to 

provide child care for employees), the employer credit for paid family and medical leave 

(applicable to wages paid to employees on family and medical leave), and the disabled access 

credit (applicable to expenditures by certain small businesses to make the businesses accessible 

to disabled individuals), among others.

60 Unused credits generally may be carried back one year 

and carried forward 20 years.

Base erosion minimum tax

Corporations meeting certain requirements are subject to a base erosion minimum tax that 

is payable in addition to all other tax liabilities.61 The base erosion minimum tax amount is 

generally the excess, if any, of 10 percent (five percent in the case of taxable years beginning in 

calendar year 2018) of its modified taxable income over an amount equal to its regular tax 

liability reduced by certain credits under chapter 1 of the Code.62 Special rules for computing 

the base erosion minimum tax apply to banks and securities dealers.

A corporation’s modified taxable income generally is its taxable income determined 

without regard to a certain portion of NOL carryovers and certain items (“base erosion tax 

benefits”) including (1) certain deductible payments made to foreign related parties, (2) 

deductions allowed for depreciation (or amortization in lieu of deprecation) with respect to 

property acquired from foreign related parties, and (3) reinsurance premiums paid to foreign 

related parties.

The base erosion minimum tax applies to a corporation (1) that is not a Regulated 

Investment Company (“RIC”) or REIT, (2) has average annual gross receipts of at least $500 

million in the prior three taxable years, and (3) whose base erosion tax benefits, as a share of 

certain total outlays made by the corporation, exceed three percent.

 59 Sec. 45.

60 Certain of these credits are scheduled to expire in 2019 or later. For more information on expiring 

provisions of the Code, see Joint Committee on Taxation, List of Expiring Federal Tax Provisions 2016-2027

(JCX-1-18), January 9, 2018.

61 Sec. 59A.

62 Credits that reduce regular tax liability (i.e., increase the base erosion minimum tax amount, if any) are 

all section 38 credits except for (1) the research credit and (2) applicable section 38 credits. Applicable section 38 

credits are the low-income housing credit, the renewable electricity production credit, and the energy investment 

credit. The exception for applicable section 38 credits generally may not reduce the base erosion minimum tax 

amount by more than 80 percent (determined without regard to the exception for applicable section 38 credits).

Sec. 59A.
17

Affiliated group

Domestic corporations that are affiliated through 80 percent or more corporate ownership 

may elect to file a consolidated return in lieu of filing separate returns. Corporations filing a 

consolidated return generally are treated as a single corporation; thus, the losses of one 

corporation can offset the income (and thus reduce the otherwise applicable tax) of other 

affiliated corporations.

Treatment of corporate distributions

The taxation of a corporation generally is separate and distinct from the taxation of its 

shareholders. A distribution by a corporation to one of its shareholders generally is taxable as a 

dividend to the shareholder to the extent of the corporation’s current or accumulated earnings 

and profits.63 Thus, the amount of a corporate dividend generally is taxed twice: once when the 

income is earned by the corporation and again when the dividend is distributed to the 

shareholder.64 Conversely, some amounts paid as interest to the debtholders of a corporation 

may be subject to only one level of tax (at the recipient level) since the corporation is allowed a 

deduction for part or all of the amount of interest expense paid or accrued.

Amounts received by a shareholder in complete liquidation of a corporation generally are 

treated as full payment in exchange for the shareholder’s stock. A liquidating corporation 

recognizes gain or loss on the distributed property as if such property were sold to the distributee 

for its fair market value. However, if a corporation liquidates a subsidiary corporation of which 

it has 80 percent or more control, no gain or loss generally is recognized by either the parent 

corporation or the subsidiary corporation.

Accumulated earnings and personal holding company taxes

Taxes at a rate of 20 percent (the top rate generally applicable to dividend income of 

individuals) may be imposed on the accumulated earnings or personal holding company income 

of a corporation. The accumulated earnings tax may be imposed if a corporation retains earnings 

in excess of reasonable business needs. The personal holding company tax may be imposed on 

the excessive passive income of a closely held corporation. The accumulated earnings tax and 

the personal holding company tax, when they apply, in effect impose the shareholder-level tax in 

addition to the corporate-level tax on accumulated earnings or undistributed personal holding 

company income.

 63 A distribution in excess of the earnings and profits of a corporation generally is a tax-free return of 

capital to the shareholder to the extent of the shareholder’s adjusted basis (generally, cost) in the stock of the 

corporation; such distribution is a capital gain if in excess of basis. A distribution of property other than cash 

generally is treated as a taxable sale of such property by the corporation and is taken into account by the 

shareholder at the property’s fair market value. A distribution of stock of the corporation generally is not a taxable 

event to either the corporation or the shareholder. 

64 This double taxation is mitigated by a reduced tax rate generally applicable to the qualified dividend 

income of individuals.
18

C. Estate, Gift and Generation-Skipping Transfer Taxes

The United States generally imposes a gift tax on any transfer of property by gift made by 

a U.S. citizen or resident, whether made directly or indirectly and whether made in trust or 

otherwise. Nonresident aliens are subject to the gift tax with respect to transfers of tangible real 

or personal property where the property is located in the United States at the time of the gift. 

The gift tax is imposed on the donor and is based on the fair market value of the property 

transferred. Deductions are allowed for certain gifts to spouses and to charities. Annual gifts of 

$15,000 (for 2018) or less per donor and per donee generally are not subject to tax.65

An estate tax also is imposed on the taxable estate of any person who was a citizen or 

resident of the United States at the time of death, and on certain property belonging to a 

nonresident of the United States that is located in the United States at the time of death. The 

estate tax is imposed on the estate of the decedent and generally is based on the fair market value 

of the property passing at death.66 The taxable estate generally equals the worldwide gross estate 

less certain allowable deductions, including a marital deduction for certain bequests to the 

surviving spouse of the decedent and a deduction for certain bequests to charities.

The gift and estate taxes are unified such that a single graduated rate schedule and 

exemption amount apply to an individual’s cumulative taxable gifts and bequests. The unified 

estate and gift tax rates begin at 18 percent on the first $10,000 in cumulative taxable transfers 

and reach 40 percent on cumulative taxable transfers over $1,000,000. A unified credit of 

$4,417,800 (for 2018)67 is available with respect to taxable transfers by gift or at death. This 

credit effectively exempts a total of $11.18 million (for 2018)68 in cumulative taxable transfers 

from the gift tax or the estate tax. The unified credit thus generally also has the effect of 

rendering the marginal rates below 40 percent inapplicable. Unused exemption as of the death of 

a spouse generally is available for use by the surviving spouse; this feature of the law sometimes 

is referred to as exemption portability.

A separate transfer tax is imposed on generation-skipping transfers in addition to any 

estate or gift tax that is normally imposed on such transfers. This tax generally is imposed on 

transfers, either directly or through a trust or similar arrangement, to a beneficiary in more than 

 65 Joint Committee staff calculation. The $10,000 gift tax exclusion amount set forth in section 2503(b)(1) 

is indexed for inflation for years after 1998. Sec. 2503(b)(2).

66 In addition to interests in property owned by the decedent at the time of death, the Federal estate tax also 

is imposed on: (1) life insurance that was either payable to the decedent’s estate or in which the decedent had an 

incident of ownership at death; (2) property over which the decedent had a general power of appointment at death; 

(3) annuities purchased by the decedent or his employer that were payable to the decedent before death; (4) property 

held by the decedents as joint tenants; (5) property transferred by the decedent before death in which the decedent 

retained a life estate or over which the decedent had the power to designate who will possess or enjoy the property; 

(6) property revocably transferred by the decedent before death; and (7) certain transfers taking effect at the death of 

the decedent.

67 Joint Committee staff calculation.

68 Joint Committee staff calculation. The $10 million exemption amount set forth in section 2010(c)(3)(A) 

(as amended by the TCJA) is indexed for inflation for years after 2011. Sec. 2010(c)(3)(B).
19

one generation below that of the transferor. For 2018, the generation-skipping transfer tax is 

imposed at a flat rate of 40 percent on generation-skipping transfers in excess of $11.18 

million.69

 69 Joint committee staff calculation.
20

D. Social Insurance Taxes

In general

Social Security benefits and certain Medicare benefits are financed primarily by payroll 

taxes on covered wages. The Federal Insurance Contributions Act (“FICA”) imposes tax on 

employers based on the amount of wages paid to an employee during the year. The tax imposed 

is composed of two parts: (1) the old age, survivors, and disability insurance (“OASDI”) tax 

equal to 6.2 percent of covered wages up to the taxable wage base ($128,400 in 2018); and (2) 

the Medicare hospital insurance (“HI”) tax amount equal to 1.45 percent of covered wages with 

no wage cap. In addition to the tax on employers, each employee is subject to FICA taxes equal 

to the amount of tax imposed on the employer. The employee FICA taxes generally must be 

withheld and, along with employer FICA taxes, remitted to the Federal government by the 

employer.70

As a parallel to FICA taxes, the Self-Employment Contributions Act (“SECA”) imposes 

taxes on the net income from self-employment of self-employed individuals. The rate of the 

OASDI portion of SECA taxes is equal to the combined employee and employer OASDI tax 

rates and applies to self-employment income up to the FICA taxable wage base. Similarly, the 

rate of the HI portion is the sum of the combined employer and employee HI rates and there is no 

cap on the amount of self-employment income to which the rate applies.71 

In addition to FICA taxes, employers are subject to a Federal unemployment insurance 

payroll tax equal to six percent of the total wages of each employee (up to $7,000) on covered 

employment. Employers are eligible for a Federal credit equal to 5.4 percent for State 

unemployment taxes, yielding a 0.6 percent effective tax rate. Federal unemployment insurance 

payroll taxes are used to fund programs maintained by the States for the benefit of unemployed 

workers.

Additional hospital insurance tax on certain high-income individuals

The employee portion of the HI tax is increased by an additional tax of 0.9 percent on 

wages received in excess of a specific threshold amount.72 However, unlike the general 1.45 

percent HI tax on wages, this additional tax is on the combined wages of the employee and the 

 70 Instead of FICA taxes, railroad employers and employees are subject, under the Railroad Retirement Tax 

Act (“RRTA”), to taxes equivalent to the OASDI and HI taxes under FICA. Under RRTA, employers and 

employees are also subject to an additional tax, referred to as the “tier 2” tax, on compensation up to a certain 

amount.

71 For purposes of computing net earnings from self-employment, taxpayers are permitted a deduction 

equal to the product of the taxpayer’s earnings (determined without regard to this deduction) and one-half of the sum 

of the rates for OASDI (12.4 percent) and HI (2.9 percent), i.e., 7.65 percent of net earnings. This deduction reflects 

the fact that the FICA rates apply to an employee’s wages, which do not include FICA taxes paid by the employer, 

whereas a self-employed individual’s net earnings are economically equivalent to an employee’s wages plus the 

employer share of FICA taxes. 

72 Sec. 3101(b), as amended by the Patient Protection and Affordable Care Act (“PPACA”), Pub. L.

No. 111-148. 
21

employee’s spouse, in the case of a joint return. The threshold amount is $250,000 in the case of

married filing jointly, $125,000 in the case of married filing separately, and $200,000 in any 

other case (unmarried individual, head of household or surviving spouse).73

The same additional HI tax applies to the HI portion of SECA tax on self-employment 

income in excess of the threshold amount. Thus, an additional tax of 0.9 percent is imposed on 

every self-employed individual on self-employment income in excess of the applicable threshold 

amount.74

 73 These threshold amounts are not indexed for inflation.

74 Sec. 1402(b).
22

E. Major Excise Taxes

The Federal tax system imposes excise taxes on selected goods and services. Generally, 

excise taxes are taxes imposed on a per unit or ad valorem (i.e., percentage of price) basis on the 

production, importation, or sale of a specific good or service. Among the goods and services 

subject to U.S. excise taxes are motor fuels, alcoholic beverages, tobacco products, firearms, air 

and ship transportation, certain environmentally hazardous products (e.g., the tax on ozone 

depleting chemicals, and a tax on crude oil and certain petroleum products to fund the Oil Spill 

Liability Trust Fund), coal, certain telephone communications (e.g. local service), certain 

wagers, indoor tanning services, and vehicles lacking in fuel efficiency.75 Additionally, an 

annual fee is imposed on health insurers and on certain manufacturers and importers of branded 

prescription drugs. 

Large excise taxes in terms of revenue for fiscal year 2017 are those for gasoline motor 

fuel ($26.6 billion),

76 diesel motor fuel ($10.7 billion),77 and domestic air tickets ($10.1

billion).78 In fiscal year 2016, the latest fiscal year for which data is publicly available, the 

Federal government collected $14.1 billion in excise taxes on domestic and imported tobacco 

products, $11.3 billion from the annual fee on health insurers, and $10.7 billion in excise taxes 

on domestic and imported alcohol beverages.

79

Revenues from certain Federal excise taxes are dedicated to trust funds (e.g., the 

Highway Trust Fund) for designated expenditure programs, and revenues from other excise taxes 

(e.g., alcoholic beverages) go to the General Fund for general purpose expenditures.

 75 For a historical description of the various Federal excise taxes, see Joint Committee on Taxation, 

Present Law and Background Information on Federal Excise Taxes (JCX-99-15), July 13, 2015. The TCJA has 

lowered tax rates on certain alcoholic beverages.

76 U.S. Department of Treasury, “FY 2017 Highway Consolidated Reports,” September 2017, pp. 12, 

available at ftp://ftp.publicdebt.treas.gov/dfi/tfmb/dfihw0917.pdf. 

77 Ibid.

78 U.S. Department of Treasury, “FY 2017 Airport and Airways Reports,” September 2017, pp. 6, 

available at ftp://ftp.publicdebt.treas.gov/dfi/tfmb/dfiaa0917.pdf. 

79 Internal Revenue Service, Statistics of Income Bulletin, Historical Table 20, “Federal Excise Taxes 

Reported to or Collected By the Internal Revenue Service, Alcohol and Tobacco Tax and Trade Bureau, and 

Customs Service, By Type of Excise Tax, Fiscal Years 1999-2016,” http://www.irs.gov/pub/irs-soi/histab20.xls

(2017).
23

Table 3.─2018 Federal Excise Tax Rates for Selected

Taxed Products or Services

Gasoline Motor Fuel 18.3 cents per gallon80

Diesel Motor Fuel 24.3 cents per gallon81

Domestic Air Tickets 7.5 percent of fare, plus $4.10 (2018) 

per domestic flight segment 

generally.82

Cigarettes83 $50.33 per thousand small cigarettes; 

$105.69 per thousand large cigarettes.

Alcoholic Beverages84 $3.50 to $18.00 per barrel of beer;

$0.07 to $3.15 per gallon of still wine; 

$2.70 to $13.50 per proof gallon of 

distilled spirits;

 80 This rate does not include the additional 0.1 cent per gallon to fund the Leaking Underground Storage 

Tank Trust Fund.

81 This rate does not include the additional 0.1 cent per gallon to fund the Leaking Underground Storage 

Tank Trust Fund.

82 Joint committee staff calculation.

83 Cigars, pipe tobacco, chewing tobacco, snuff, and roll-your-own tobacco are also subject to excise tax at 

various rates. Sec. 5701.

84 The rate of excise tax on alcoholic beverages may depend on volume produced, location of production, 

and alcoholic content. Artificially carbonated wine, sparkling wine, and hard cider are also subject to excise tax at 

various rates. Secs. 5001, 5041, and 5051.
24

APPENDIX: FIGURES AND TABLES

Page

Table A-1.−Federal Receipts by Source, 1968-2017.....................................................................25

Table A-2.−Federal Receipts by Source, as a Percentage of GDP, 1968-2017.............................26

Table A-3.−Federal Receipts by Source, as a Percentage of Total Revenues, 1968-2017............27

Figure A-1.−Federal Receipts by Source as Share of Total Receipts, 1950-2017 ........................28

Figure A-2.−Federal Receipts as a Percentage of GDP, 1950-2017..............................................29

Figure A-3.−Federal Receipts by Source, 2018 (Projected)..........................................................30

Figure A-4.−Sources of Gross Income for Individual Taxpayers, 2018 (Projected).....................31

Table A-4.−Number of Business Returns by Type, 1978-2015 ....................................................32

Table A-5.−Social Security Taxable Wage Base and Rates of Tax, 1975-2018 ...........................33

Table A-6.−Distribution of Income and Taxes, and Average Tax Rates in 2018 (Projected).......34

Table A-7.−Tax Returns with Income or Employment Taxes in 2018 (Projected).......................35

Table A-8.−Marginal Tax Rates on Labor and Long-Term Capital Gains, by Income

Category in 2018 (Projected).........................................................................................................35

Table A-9.−Distribution of Selected Sources of Income in 2018 (Projected)...............................36

Table A-10.−Distribution of Selected Itemized Deductions, 2018 (Projected).............................36
25

Fiscal Year Individual 

Income Tax

Corporate 

Taxes

Social 

Insurance 

Taxes [1]

 Excise 

Taxes

Estate and 

Gift Taxes

Other 

Receipts [2] Total

1968 68,726 28,665 33,923 14,079 3,051 4,529 152,973

1969 87,249 36,678 39,015 15,222 3,491 5,227 186,882

1970 90,412 32,829 44,362 15,705 3,644 5,855 192,807

1971 86,230 26,785 47,325 16,614 3,735 6,450 187,139

1972 94,737 32,166 52,574 15,477 5,436 6,919 207,309

1973 103,246 36,153 63,115 16,260 4,917 7,109 230,800

1974 118,952 38,620 75,071 16,844 5,035 8,702 263,224

1975 122,386 40,621 84,534 16,551 4,611 10,387 279,090

1976 131,603 41,409 90,769 16,963 5,216 12,101 298,061

1977 157,626 54,892 106,485 17,548 7,327 11,681 355,559

1978 180,988 59,952 120,967 18,376 5,285 13,993 399,561

1979 217,841 65,677 138,939 18,745 5,411 16,690 463,303

1980 244,069 64,600 157,803 24,329 6,389 19,922 517,112

1981 285,917 61,137 182,720 40,839 6,787 21,872 599,272

1982 297,744 49,207 201,498 36,311 7,991 25,015 617,766

1983 288,938 37,022 208,994 35,300 6,053 24,256 600,563

1984 298,415 56,893 239,376 37,361 6,010 28,382 666,437

1985 334,531 61,331 265,163 35,992 6,422 30,598 734,037

1986 348,959 63,143 283,901 32,919 6,958 33,275 769,155

1987 392,557 83,926 303,318 32,457 7,493 34,536 854,287

1988 401,181 94,508 334,335 35,227 7,594 36,393 909,238

1989 445,690 103,291 359,416 34,386 8,745 39,576 991,104

1990 466,884 93,507 380,047 35,345 11,500 44,674 1,031,957

1991 467,827 98,086 396,015 42,402 11,138 39,519 1,054,987

1992 475,964 100,270 413,688 45,569 11,143 44,574 1,091,208

1993 509,680 117,520 428,299 48,057 12,577 38,201 1,154,334

1994 543,055 140,385 461,475 55,225 15,225 43,202 1,258,567

1995 590,244 157,004 484,473 57,484 14,763 47,822 1,351,790

1996 656,417 171,824 509,414 54,014 17,189 44,195 1,453,053

1997 737,466 182,293 539,371 56,924 19,845 43,333 1,579,232

1998 828,586 188,677 571,831 57,673 24,076 50,885 1,721,728

1999 879,480 184,680 611,833 70,414 27,782 53,263 1,827,452

2000 1,004,462 207,289 652,852 68,865 29,010 62,713 2,025,191

2001 994,339 151,075 693,967 66,232 28,400 57,069 1,991,082

2002 858,345 148,044 700,760 66,989 26,507 52,491 1,853,136

2003 793,699 131,778 712,978 67,524 21,959 54,376 1,782,314

2004 808,959 189,371 733,407 69,855 24,831 53,691 1,880,114

2005 927,222 278,282 794,125 73,094 24,764 56,124 2,153,611

2006 1,043,908 353,915 837,821 73,961 27,877 69,387 2,406,869

2007 1,163,472 370,243 869,607 65,069 26,044 73,550 2,567,985

2008 1,145,747 304,346 900,155 67,334 28,844 77,565 2,523,991

2009 915,308 138,229 890,917 62,483 23,482 74,570 2,104,989

2010 898,549 191,437 864,814 66,909 18,885 122,112 2,162,706

2011 1,091,473 181,085 818,792 72,381 7,399 132,336 2,303,466

2012 1,132,206 242,289 845,314 79,061 13,973 137,145 2,449,988

2013 1,316,405 273,506 947,820 84,007 18,912 134,453 2,775,103

2014 1,394,568 320,731 1,023,458 93,368 19,300 170,062 3,021,487

2015 1,540,802 343,797 1,065,257 98,279 19,232 182,519 3,249,886

2016 1,546,075 299,571 1,115,065 95,026 21,354 190,870 3,267,961

2017 [3] 1,587,119 297,048 1,161,896 83,822 22,768 162,241 3,314,894

[1] Social insurance taxes comprise old-age and survivors insurance, disability insurance, hospital insurance, railroad retirement,

 railroad social security equivalent account, employment insurance, employee share of Federal employees retirement, and certain

 non-Federal employees retirement.

[2] Other receipts are primarily composed of (1) customs duties and fees, and (2) deposits of earnings by the Federal Reserve system

[3] Data for FY1968-2016 comes from OMB historical tables (not yet updated with data for FY2017); FY2017 data comes from Monthly

 Treasury Statement of Receipts and Outlays.

Sources: Office of Management and Budget, Historical Tables, Budget of the U.S. Government, Fiscal Year 2018; Department of the

Treasury, Bureau of the Fiscal Service, Final Monthly Treasury Statement of Receipts and Outlays Fiscal Year 2017 through

September 30, 2017; Joint Committee on Taxation staff calculations.

(millions of dollars)

Table A-1.−Federal Receipts by Source, 1968-2017
26

Fiscal Year Individual 

Income Tax

Corporate 

Taxes

Social 

Insurance 

Taxes [1]

 Excise Taxes Estate and 

Gift Taxes

Other 

Receipts [2] Total

1968 7.6 3.2 3.8 1.6 0.3 0.5 17.0

1969 8.9 3.7 4.0 1.5 0.4 0.5 19.0

1970 8.6 3.1 4.2 1.5 0.3 0.6 18.4

1971 7.7 2.4 4.2 1.5 0.3 0.6 16.7

1972 7.8 2.6 4.3 1.3 0.4 0.6 17.0

1973 7.6 2.7 4.7 1.2 0.4 0.5 17.0

1974 8.0 2.6 5.1 1.1 0.3 0.6 17.7

1975 7.6 2.5 5.2 1.0 0.3 0.6 17.3

1976 7.4 2.3 5.1 0.9 0.3 0.7 16.6

1977 7.8 2.7 5.2 0.9 0.4 0.6 17.5

1978 7.9 2.6 5.3 0.8 0.2 0.6 17.5

1979 8.5 2.6 5.4 0.7 0.2 0.6 18.0

1980 8.7 2.3 5.6 0.9 0.2 0.7 18.5

1981 9.1 1.9 5.8 1.3 0.2 0.7 19.1

1982 9.0 1.5 6.1 1.1 0.2 0.8 18.6

1983 8.2 1.0 5.9 1.0 0.2 0.7 17.0

1984 7.5 1.4 6.1 0.9 0.2 0.7 16.9

1985 7.8 1.4 6.2 0.8 0.2 0.7 17.2

1986 7.7 1.4 6.3 0.7 0.2 0.7 17.0

1987 8.2 1.8 6.3 0.7 0.2 0.7 17.9

1988 7.8 1.8 6.5 0.7 0.1 0.7 17.6

1989 8.0 1.9 6.5 0.6 0.2 0.7 17.8

1990 7.9 1.6 6.4 0.6 0.2 0.8 17.4

1991 7.7 1.6 6.5 0.7 0.2 0.6 17.3

1992 7.4 1.6 6.4 0.7 0.2 0.7 17.0

1993 7.5 1.7 6.3 0.7 0.2 0.6 17.0

1994 7.5 2.0 6.4 0.8 0.2 0.6 17.5

1995 7.8 2.1 6.4 0.8 0.2 0.6 17.8

1996 8.2 2.2 6.4 0.7 0.2 0.6 18.2

1997 8.7 2.1 6.4 0.7 0.2 0.5 18.6

1998 9.3 2.1 6.4 0.6 0.3 0.6 19.2

1999 9.2 1.9 6.4 0.7 0.3 0.6 19.2

2000 9.9 2.0 6.4 0.7 0.3 0.6 20.0

2001 9.4 1.4 6.6 0.6 0.3 0.5 18.8

2002 7.9 1.4 6.4 0.6 0.2 0.5 17.0

2003 7.0 1.2 6.3 0.6 0.2 0.5 15.7

2004 6.7 1.6 6.1 0.6 0.2 0.4 15.6

2005 7.2 2.2 6.2 0.6 0.2 0.4 16.7

2006 7.6 2.6 6.1 0.5 0.2 0.5 17.6

2007 8.1 2.6 6.1 0.5 0.2 0.5 17.9

2008 7.8 2.1 6.1 0.5 0.2 0.5 17.1

2009 6.3 1.0 6.2 0.4 0.2 0.5 14.6

2010 6.1 1.3 5.8 0.5 0.1 0.8 14.6

2011 7.1 1.2 5.3 0.5 0.0 0.9 15.0

2012 7.1 1.5 5.3 0.5 0.1 0.9 15.3

2013 8.0 1.7 5.7 0.5 0.1 0.8 16.8

2014 8.1 1.9 5.9 0.5 0.1 1.0 17.5

2015 8.6 1.9 5.9 0.5 0.1 1.0 18.2

2016 8.4 1.6 6.1 0.5 0.1 1.0 17.8

2017 [3] 8.3 1.5 6.1 0.4 0.1 0.8 17.3

1950-2017 Avg 7.8 2.6 4.9 1.2 0.2 0.6 17.3

[1] Social insurance taxes comprise old-age and survivors insurance, disability insurance, hospital insurance, railroad

 retirement, railroad social security equivalent account, employment insurance, employee share of Federal employees

 retirement, and certain non-Federal employees retirement.

[2] Other receipts are primarily composed of (1) customs duties and fees, and (2) deposits of earnings by the Federal

 Reserve system.

[3] Data for FY1968-2016 comes from OMB historical tables (not yet updated with data for FY2017); FY2017 data comes

 from Monthly Treasury Statement of Receipts and Outlays and BEA quarterly GDP releases.

Sources: Office of Management and Budget, Historical Tables, Budget of the U.S. Government, Fiscal Year 2018;

Department of the Treasury, Bureau of the Fiscal Service, Final Monthly Treasury Statement of Receipts and Outlays,

Fiscal Year 2017 through September 30, 2017; Bureau of Economic Analysis Gross Domestic Product, Seasonally

adjusted at annual rates; Joint Committee on Taxation staff calculations.

Table A-2.−Federal Receipts by Source, as a Percentage of GDP, 1968-2017
27

Fiscal Year Individual 

Income Tax

Corporate 

Taxes

Social 

Insurance 

Taxes [1]

 Excise Taxes Estate and 

Gift Taxes

Other 

Receipts [2]

1968 44.9 18.7 22.2 9.2 2.0 3.0

1969 46.7 19.6 20.9 8.1 1.9 2.8

1970 46.9 17.0 23.0 8.1 1.9 3.0

1971 46.1 14.3 25.3 8.9 2.0 3.4

1972 45.7 15.5 25.4 7.5 2.6 3.3

1973 44.7 15.7 27.3 7.0 2.1 3.1

1974 45.2 14.7 28.5 6.4 1.9 3.3

1975 43.9 14.6 30.3 5.9 1.7 3.7

1976 44.2 13.9 30.5 5.7 1.7 4.1

1977 44.3 15.4 29.9 4.9 2.1 3.3

1978 45.3 15.0 30.3 4.6 1.3 3.5

1979 47.0 14.2 30.0 4.0 1.2 3.6

1980 47.2 12.5 30.5 4.7 1.2 3.9

1981 47.7 10.2 30.5 6.8 1.1 3.6

1982 48.2 8.0 32.6 5.9 1.3 4.0

1983 48.1 6.2 34.8 5.9 1.0 4.0

1984 44.8 8.5 35.9 5.6 0.9 4.3

1985 45.6 8.4 36.1 4.9 0.9 4.2

1986 45.4 8.2 36.9 4.3 0.9 4.3

1987 46.0 9.8 35.5 3.8 0.9 4.0

1988 44.1 10.4 36.8 3.9 0.8 4.0

1989 45.0 10.4 36.3 3.5 0.9 4.0

1990 45.2 9.1 36.8 3.4 1.1 4.3

1991 44.3 9.3 37.5 4.0 1.1 3.7

1992 43.6 9.2 37.9 4.2 1.0 4.1

1993 44.2 10.2 37.1 4.2 1.1 3.3

1994 43.1 11.2 36.7 4.4 1.2 3.4

1995 43.7 11.6 35.8 4.3 1.1 3.5

1996 45.2 11.8 35.1 3.7 1.2 3.0

1997 46.7 11.5 34.2 3.6 1.3 2.7

1998 48.1 11.0 33.2 3.3 1.4 3.0

1999 48.1 10.1 33.5 3.9 1.5 2.9

2000 49.6 10.2 32.2 3.4 1.4 3.1

2001 49.9 7.6 34.9 3.3 1.4 2.9

2002 46.3 8.0 37.8 3.6 1.4 2.8

2003 44.5 7.4 40.0 3.8 1.2 3.1

2004 43.0 10.1 39.0 3.7 1.3 2.9

2005 43.1 12.9 36.9 3.4 1.1 2.6

2006 43.4 14.7 34.8 3.1 1.2 2.9

2007 45.3 14.4 33.9 2.5 1.0 2.9

2008 45.4 12.1 35.7 2.7 1.1 3.1

2009 43.5 6.6 42.3 3.0 1.1 3.5

2010 41.5 8.9 40.0 3.1 0.9 5.6

2011 47.4 7.9 35.5 3.1 0.3 5.7

2012 46.2 9.9 34.5 3.2 0.6 5.6

2013 47.4 9.9 34.2 3.0 0.7 4.8

2014 46.2 10.6 33.9 3.1 0.6 5.6

2015 47.4 10.6 32.8 3.0 0.6 5.6

2016 47.3 9.2 34.1 2.9 0.7 5.8

2017 [3] 47.9 9.0 35.1 2.5 0.7 4.9

1950-2017 Avg 45.0 14.9 28.6 6.8 1.4 3.3

[1] Social insurance taxes comprise old-age and survivors insurance, disability insurance, hospital insurance, railroad

 retirement, railroad social security equivalent account, employment insurance, employee share of Federal employees

 retirement, and certain non-Federal employees retirement.

[2] Other receipts are primarily composed of (1) customs duties and fees, and (2) deposits of earnings by the Federal

 Reserve system.

[3] Data for FY1968-2016 comes from OMB historical tables (not yet updated with data for FY2017); FY2017 data comes

 from Monthly Treasury Statement of Receipts and Outlays

Sources: Office of Management and Budget, Historical Tables, Budget of the U.S. Government, Fiscal Year 2018;

Department of the Treasury, Bureau of the Fiscal Service, Final Monthly Treasury Statement of Receipts and Outlays,

Fiscal Year 2017 through September 30, 2017; Joint Committee on Taxation staff calculations.

Table A-3.−Federal Receipts by Source, as a Percentage of Total Revenues, 1968-2017
28

0.0

10.0

20.0

30.0

40.0

50.0

19501951195219531954195519561957195819591960196119621963196419651966196719681969197019711972197319741975197619771978197919801981198219831984198519861987198819891990199119921993199419951996199719981999200020012002200320042005200620072008200920102011201220132014201520162017

Figure A-1.−Federal Receipts by Source as Share of Total Receipts, 1950-2017

Individual Income Tax Corporate Taxes Employment Taxes Excise Taxes Estate and Gift Taxes

Sources: Office of Management and Budget, Historical Tables, Fiscal Year 2018; Final Monthly Treasury Statement Fiscal Year 2017; Joint Committee on Taxation calculations.
29

0.0

5.0

10.0

15.0

20.0

25.0

30.0

1950195219541956195819601962196419661968197019721974197619781980198219841986198819901992199419961998200020022004200620082010201220142016

Figure A-2.−Federal Receipts as a Percentage of GDP, 1950-2017

Sources: Office of Management and Budget, Historical Tables, Fiscal Year 2018; Final Monthly Treasury Statement Fiscal Year 2017; Bureau of Economic Analysis; Joint Committee on Taxation calculations.
30

Individual Income Tax

50.0%

Corporate 

Income Tax

7.2%

Social Insurance Taxes

34.3%

Excise Taxes

3.0%

Estate & Gift Tax

0.6%

Other Taxes

4.8%

Figure A-3.─Federal Receipts by Source, 2018 (Projected)

Source: Congressional Budget Office, January 2017 Baseline and Joint Committee on Taxation calculations.
31

Wages and Salaries

67.9%

Interest Income 

0.8%

Dividend Income

2.3%

Business, Farm, and Sch E

10.2%

Capital Gains

5.9%

Social Security, and pension and 

IRA distributions

12.2%

Other

0.7%

Figure A-4.−Sources of Gross Income for Individual Taxpayers, 2018 (Projected)

Source: Joint Committe on Taxation staff estimates.
32

Year Non-Farm 

Sole Props

C 

Corporations

S 

Corporations Partnerships Farms Total

1978 8,908,289 1,898,100 478,679 1,234,157 2,704,794 15,224,019

1979 9,343,603 2,041,887 514,907 1,299,593 2,605,684 15,805,674

1980 9,730,019 2,165,149 545,389 1,379,654 2,608,430 16,428,641

1981 9,584,790 2,270,931 541,489 1,460,502 2,641,254 16,498,966

1982 10,105,515 2,361,714 564,219 1,514,212 2,689,237 17,234,897

1983 10,703,921 2,350,804 648,267 1,541,539 2,710,044 17,954,575

1984 11,262,390 2,469,404 701,339 1,643,581 2,694,420 18,771,134

1985 11,928,573 2,552,470 724,749 1,713,603 2,620,861 19,540,256

1986 12,393,700 2,602,301 826,214 1,702,952 2,524,331 20,049,498

1987 13,091,132 2,484,228 1,127,905 1,648,035 2,420,186 20,771,486

1988 13,679,302 2,305,598 1,257,191 1,654,245 2,367,527 21,263,863

1989 14,297,558 2,204,896 1,422,967 1,635,164 2,359,718 21,920,303

1990 14,782,738 2,141,558 1,575,092 1,553,529 2,321,153 22,374,070

1991 15,180,722 2,105,200 1,696,927 1,515,345 2,290,908 22,789,102

1992 15,495,419 2,083,652 1,785,371 1,484,752 2,288,218 23,137,412

1993 15,848,119 2,063,124 1,901,505 1,467,567 2,272,407 23,552,722

1994 16,153,871 2,318,614 2,023,754 1,493,963 2,242,324 24,232,526

1995 16,423,872 2,321,048 2,153,119 1,580,900 2,219,244 24,698,183

1996 16,955,023 2,326,954 2,304,416 1,654,256 2,188,025 25,428,674

1997 17,176,486 2,257,829 2,452,254 1,758,627 2,160,954 25,806,150

1998 17,398,440 2,260,757 2,588,081 1,855,348 2,091,845 26,194,471

1999 17,575,643 2,210,129 2,725,775 1,936,919 2,067,883 26,516,349

2000 17,902,791 2,184,795 2,860,478 2,057,500 2,083,217 27,088,781

2001 18,338,190 2,149,105 2,986,486 2,132,117 2,027,643 27,633,541

2002 18,925,517 2,112,230 3,154,377 2,242,169 2,019,647 28,453,940

2003 19,710,079 2,059,631 3,341,606 2,375,375 2,017,879 29,504,570

2004 20,590,691 2,039,631 3,518,334 2,546,877 2,022,298 30,717,831

2005 21,467,566 1,987,171 3,684,086 2,763,625 2,002,088 31,904,536

2006 22,074,953 1,968,032 3,872,766 2,947,116 1,980,032 32,842,899

2007 23,122,698 1,878,956 3,989,893 3,096,334 2,013,681 34,101,562

2008 22,614,483 1,797,278 4,049,943 3,146,006 1,966,656 33,574,366

2009 22,659,976 1,729,984 4,094,562 3,168,728 1,947,670 33,600,920

2010 23,003,656 1,686,171 4,127,554 3,248,481 1,934,731 34,000,593

2011 23,426,940 1,664,553 4,158,572 3,285,177 1,894,910 34,430,152

2012 23,553,850 1,635,369 4,205,452 3,388,561 1,862,280 34,645,512

2013 24,031,243 1,629,895 4,257,909 3,460,699 1,848,973 35,228,719

2014 24,631,831 1,621,366 4,380,125 3,611,255 1,823,136 36,067,713

2015 25,226,245 1,632,229 4,487,336 3,715,187 1,841,542 36,902,539

Source: Internal Revenue Service, Statistics of Income, published and unpublished data.

Table A-4.−Number of Business Returns by Type, 1978-2015
33

Total OASDI HI Total OASDI HI

1975 $14,100 5.85 4.95 0.9 7.9 7.0 0.9

1976 $15,300 5.85 4.95 0.9 7.9 7.0 0.9

1977 $16,500 5.85 4.95 0.9 7.9 7.0 0.9

1978 $17,700 6.05 5.05 1.0 8.1 7.1 1.0

1979 $22,900 6.13 5.08 1.05 8.1 7.05 1.05

1980 $25,900 6.13 5.08 1.05 8.1 7.05 1.05

1981 $29,700 6.65 5.35 1.3 9.3 8 1.3

1982 $32,400 6.7 5.4 1.3 9.35 8.05 1.3

1983 $35,700 6.7 5.4 1.3 9.35 8.05 1.3

1984 [1] $37,800 7.0 5.7 1.3 14.0 11.4 2.6

1985 $39,600 7.05 5.7 1.35 14.1 11.4 2.7

1986 $42,000 7.15 5.7 1.45 14.3 11.4 2.9

1987 $43,800 7.15 5.7 1.45 14.3 11.4 2.9

1988 $45,000 7.51 6.06 1.45 15.02 12.12 2.9

1989 $48,000 7.51 6.06 1.45 15.02 12.12 2.9

1990 $51,300 7.65 6.2 1.45 15.3 12.4 2.9

1991 $53,400 7.65 6.2 1.45 15.3 12.4 2.9

1992 $55,500 7.65 6.2 1.45 15.3 12.4 2.9

1993 $57,600 7.65 6.2 1.45 15.3 12.4 2.9

1994 $60,600 7.65 6.2 1.45 15.3 12.4 2.9

1995 $61,200 7.65 6.2 1.45 15.3 12.4 2.9

1996 $62,700 7.65 6.2 1.45 15.3 12.4 2.9

1997 $65,400 7.65 6.2 1.45 15.3 12.4 2.9

1998 $68,400 7.65 6.2 1.45 15.3 12.4 2.9

1999 $72,600 7.65 6.2 1.45 15.3 12.4 2.9

2000 $76,200 7.65 6.2 1.45 15.3 12.4 2.9

2001 $80,400 7.65 6.2 1.45 15.3 12.4 2.9

2002 $84,900 7.65 6.2 1.45 15.3 12.4 2.9

2003 $87,900 7.65 6.2 1.45 15.3 12.4 2.9

2004 $87,900 7.65 6.2 1.45 15.3 12.4 2.9

2005 $90,000 7.65 6.2 1.45 15.3 12.4 2.9

2006 $94,200 7.65 6.2 1.45 15.3 12.4 2.9

2007 $97,500 7.65 6.2 1.45 15.3 12.4 2.9

2008 $102,000 7.65 6.2 1.45 15.3 12.4 2.9

2009 $106,800 7.65 6.2 1.45 15.3 12.4 2.9

2010 $106,800 7.65 6.2 1.45 15.3 12.4 2.9

2011 [2] $106,800 7.65/5.65 6.2/4.2 1.45 13.3 10.4 2.9

2012 [2] $110,100 7.65/5.65 6.2/4.2 1.45 13.3 10.4 2.9

2013 [3] $113,700 7.65 6.2 1.45 15.3 12.4 2.9

2014 [3] $117,000 7.65 6.2 1.45 15.3 12.4 2.9

2015 [3] $118,500 7.65 6.2 1.45 15.3 12.4 2.9

2016 [3] $118,500 7.65 6.2 1.45 15.3 12.4 2.9

2017 [3] $127,200 7.65 6.2 1.45 15.3 12.4 2.9

2018 [3] $128,400 7.65 6.2 1.45 15.3 12.4 2.9

[1] For 1984 only, employees were allowed a credit of 0.3 percent of taxable wages against their FICA tax liability,

 reducing the effective rate to 6.7 percent.

[2] The Tax Relief, Unemployment Reauthorization, and Job Creation Act of 2010 reduced the FICA tax rate for employees by

 two percentage points for 2011. Specifically, the employer OASDI rate remains at 6.2 while the employee rate is reduced

 to 4.2. Equivalent reductions were made to the SECA tax. Subsequent legislation extended that treatment to 2012.

[3] For 2013, and subsequent years, an additional employee HI tax of 0.9 percent applies to wages in excess of $250,000 for

 married taxpayers filing jointly ($125,000 for married taxpayers filing separately) and $200,000 in all other cases. 

 Equivalent increases were made to the SECA tax. For wages in excess of the threshold in these years, the HI contribution

 rate is 2.35 percent for employees and 3.8 percent for self-employed persons, and the total HI and OASDI contribution

 rate is 8.55 percent (not the corresponding rates reflected in the table).

Source: Social Security Administration.

Contribution Rate for Both Employers 

and Employees (Percent of Covered 

Earnings)

Contribution Rate for Self-Employed 

Year Persons

Annual 

Maximum 

Taxable 

Wage Base 

for OASDI 

Table A-5.−Social Security Taxable Wage Base and Rates of Tax, 1975-2018
34

Combined Income, Employment, and 

Excise Taxes Under Present Law [3] Individual Income Taxes Employment Taxes

$ Billions

Percent 

share

Average Tax 

Rate $ Billions

Percent 

share

Average Tax 

Rate $ Billions

Percent 

share

Average Tax 

Rate

Less than $10,000...................... 18,853 10.7% 69,429 0.5% 7.0 0.2% 10.1% -6.1 -0.4% -8.8% 7.5 0.6% 10.8%

$10,000 to $20,000..................... 19,484 11.1% 300,494 2.0% -2.8 -0.1% -0.9% -40.8 -3.0% -13.6% 30.4 2.6% 10.1%

$20,000 to $30,000..................... 21,094 12.0% 524,572 3.5% 16.2 0.6% 3.1% -36.2 -2.6% -6.9% 41.9 3.6% 8.0%

$30,000 to $40,000..................... 16,076 9.1% 557,744 3.7% 39.9 1.4% 7.2% -18.4 -1.3% -3.3% 46.6 4.0% 8.4%

$40,000 to $50,000..................... 12,475 7.1% 560,185 3.7% 54.0 1.8% 9.6% -5.0 -0.4% -0.9% 46.6 4.0% 8.3%

$50,000 to $75,000..................... 27,098 15.4% 1,672,379 11.1% 227.9 7.8% 13.6% 40.4 2.9% 2.4% 149.6 12.9% 8.9%

$75,000 to $100,000.................... 17,803 10.1% 1,544,193 10.3% 243.3 8.3% 15.8% 74.6 5.4% 4.8% 132.4 11.4% 8.6%

$100,000 to $200,000.................. 31,329 17.8% 4,314,390 28.7% 847.2 28.8% 19.6% 331.5 24.1% 7.7% 404.2 34.9% 9.4%

$200,000 to $500,000.................. 9,795 5.6% 2,745,930 18.3% 672.1 22.9% 24.5% 367.5 26.7% 13.4% 223.1 19.2% 8.1%

$500,000 to $1,000,000............... 1,216 0.7% 816,527 5.4% 235.9 8.0% 28.9% 169.3 12.3% 20.7% 39.3 3.4% 4.8%

$1,000,000 and over.................... 597 0.3% 1,901,228 12.7% 599.1 20.4% 31.5% 499.7 36.3% 26.3% 37.6 3.2% 2.0%

Total, All Taxpayers................. 175,819 100.0% 15,007,072 100.0% 2,939.7 100.0% 19.6% 1,376.3 100.0% 9.2% 1,159.3 100.0% 7.7%

[1] The income concept used to place tax returns into income categories is adjusted gross income (AGI) plus: (1) tax-exempt interest, 

 (2) employer contributions for health plans and life insurance, (3) employer share of FICA tax, (4) worker's compensation, 

 (5) nontaxable Social Security benefits, (6) insurance value of Medicare benefits, (7) alternative minimum tax preference items,

 (8) individual share of business taxes, and (9) excluded income of U.S. citizens living abroad. Categories are measured at 2018 levels.

[2] Includes nonfilers, excludes dependent filers and returns with negative income.

[3] Federal taxes are equal to individual income tax (including the outlay portion of refundable credits), employment tax (attributed to employees), 

 excise taxes (attributed to consumers), and corporate income taxes. The estimates of Federal taxes are preliminary and subject to change. 

 Individuals who are dependents of other taxpayers and taxpayers with negative income are excluded from the analysis.

 Does not include indirect effects.

[4] The average tax rate is equal to Federal taxes described in footnote [3] divided by income described in footnote [1].

Source: Joint Committee on Taxation staff estimates.

Table A-6.─Distribution of Income and Taxes, and Average Tax Rates in 2018 (Projected)

Number of 

Returns [2] 

(Thousands)

Share of 

Returns

Income 

($ Millions)

Share of 

Income

Income Category [1]
35

Individual 

Income 

Taxes

Employment 

Taxes

$ Billions $ Billions

Less than $10,000.................... 18.9 -6.1 7.5

$10,000 to $20,000.................... 19.5 -40.8 30.4

$20,000 to $30,000.................... 21.1 -36.2 41.9

$30,000 to $40,000.................... 16.1 -18.4 46.6

$40,000 to $50,000.................... 12.5 -5.0 46.6

$50,000 to $75,000.................... 27.1 40.4 149.6

$75,000 to $100,000.................. 17.8 74.6 132.4

$100,000 to $200,000................ 31.3 331.5 404.2

$200,000 to $500,000................ 9.8 367.5 223.1

$500,000 to $1,000,000.............. 1.2 169.3 39.3

$1,000,000 and over................... 0.6 499.7 37.6

Total, All Taxpayers............... 175.8 1376.3 1159.3

[1] The income concept used to place tax returns into income categories is adjusted gross income (AGI) plus: (1) tax-exempt interest, 

 (2) employer contributions for health plans and life insurance, (3) employer share of FICA tax, (4) worker's compensation, 

 (5) nontaxable Social Security benefits, (6) insurance value of Medicare benefits, (7) alternative minimum tax preference items,

 (8) individual share of business taxes, and (9) excluded income of U.S. citizens living abroad. Categories are measured at 2018 levels.

[2] Includes nonfilers, excludes dependent filers and returns with negative income.

[3] Less than 50,000.

Source: Joint Committee on Taxation staff estimates.

0.6

28.9

Employment Taxes 

Less than Income 

Taxes

Returns (Millions)

Employment Taxes Greater than 

Income Taxes

3.6

4.1

10.3

7.4

1.2

[3]

0.1

0.2

0.4

1.0

[3] 1.0%

118.5 67.4%

2.3 23.8%

[3] 1.5%

13.2 73.9%

20.9 66.9%

9.4 75.0%

21.5 79.4%

13.5 63.9%

11.7 72.9%

11.1 59.0%

14.9 76.4%

Table A-7.─Tax Returns with Income or Employment Taxes in 2018 (Projected)

Income Category [1]

Number of 

Returns [2] 

(Millions)

Returns (Millions) Fraction of 

Total Returns

Long-Term Capital Gains 

Income

Average Marginal Capital 

Gains Tax Rate [2]

Less than $10,000..................... 0.8%

$10,000 to $20,000.................... 1.3%

$20,000 to $30,000.................... 2.2%

$30,000 to $40,000.................... 3.3%

$40,000 to $50,000.................... 1.9%

$50,000 to $75,000.................... 6.2%

$75,000 to $100,000.................. 9.1%

$100,000 to $200,000................. 12.9%

$200,000 to $500,000................. 18.1%

$500,000 to $1,000,000.............. 23.0%

$1,000,000 and over................... 23.9%

Total, All Taxpayers................ 21.4%

[1] The income concept used to place tax returns into income categories is adjusted gross income (AGI) plus: (1) tax-exempt interest, 

 (2) employer contributions for health plans and life insurance, (3) employer share of FICA tax, (4) worker's compensation, 

 (5) nontaxable Social Security benefits, (6) insurance value of Medicare benefits, (7) alternative minimum tax preference items,

 (8) individual share of business taxes, and (9) excluded income of U.S. citizens living abroad. Categories are measured at 2018 levels.

[2] For individual income and employment taxes, the average marginal tax rate is equal to the change in taxes from an additional $100 

 of wages to each spouse with positive wages. For long-term capital gain, the average marginal tax rate equals the change in taxes from

 an additional 1% increase in long-term capital gains to each taxpayer with positive long-term capital gains. Effective marginal rates may 

 be higher or lower than statutory marginal rates due to certain provisions in the Code including the phasein and phaseout of certain

 exemptions or credits.

Source: Joint Committee on Taxation staff estimates.

34.4% 6.9% 41.3%

13.0% 13.5% 26.6%

23.9% 9.9% 33.7%

33.4% 7.2% 40.6%

15.0% 14.2% 29.2%

17.9% 13.5% 31.4%

12.5% 14.2% 26.7%

15.0% 14.2% 29.2%

8.9% 14.2% 23.1%

11.7% 14.2% 25.9%

-7.2% 14.2% 7.1%

-1.5% 14.2% 12.7%

Table A-8.─Marginal Tax Rates on Labor and Long-Term Capital Gains, by Income Category in 2018 (Projected)

Income Category [1]

Average Marginal Income 

Tax Rate [2]

Average Marginal 

Employment Tax Rate [2]

Average Combined 

Marginal Income and 

Employment Tax Rate [2]

Labor Income
36

Wages

Long-Term 

Capital 

Gains in AGI

Dividend 

Income

Interest 

Income

Schedule C 

Income

Schedule E 

Income

$ Billions $ Billions $ Billions $ Billions $ Billions $ Billions

Less than $10,000...................... 18.9 41.4 0.1 0.6 0.6 6.8 -0.6

$10,000 to $20,000...................... 19.5 162.6 0.5 0.8 0.5 32.1 0.1

$20,000 to $30,000...................... 21.1 245.2 0.7 1.5 1.2 17.4 0.9

$30,000 to $40,000...................... 16.1 277.3 0.9 1.9 1.7 13.3 1.6

$40,000 to $50,000...................... 12.5 279.0 1.5 3.0 1.9 10.6 1.3

$50,000 to $75,000...................... 27.1 932.6 7.0 10.4 5.1 20.7 5.3

$75,000 to $100,000.................... 17.8 830.0 10.5 12.5 5.9 21.0 9.1

$100,000 to $200,000.................. 31.3 2,574.1 52.0 47.5 16.3 70.5 54.5

$200,000 to $500,000.................. 9.8 1,679.7 95.0 57.9 16.0 87.4 144.0

$500,000 to $1,000,000................ 1.2 428.5 73.1 32.8 8.4 38.9 123.0

$1,000,000 and over..................... 0.6 584.1 458.7 107.9 40.5 51.1 501.3

Total, All Taxpayers.................. 175.8 8,034.5 700.0 276.9 98.1 369.7 840.6

[1] The income concept used to place tax returns into income categories is adjusted gross income (AGI) plus: (1) tax-exempt interest, 

 (2) employer contributions for health plans and life insurance, (3) employer share of FICA tax, (4) worker's compensation, 

 (5) nontaxable Social Security benefits, (6) insurance value of Medicare benefits, (7) alternative minimum tax preference items,

 (8) individual share of business taxes, and (9) excluded income of U.S. citizens living abroad. Categories are measured at 2018 levels.

[2] Includes nonfilers, excludes dependent filers and returns with negative income.

Source: Joint Committee on Taxation staff estimates.

Number of 

Returns [2] 

(Millions)

Table A-9.─Distribution of Selected Sources of Income in 2018 (Projected)

Income Category [1]

Returns 

(Thousands) $ Millions

Returns 

(Thousands) $ Millions

Returns 

(Thousands) $ Millions

Less than $10,000...................... 83 332 64 910 34 28

$10,000 to $20,000..................... 145 650 113 1,438 79 141

$20,000 to $30,000..................... 261 1,025 183 2,003 147 303

$30,000 to $40,000..................... 410 1,642 258 2,862 283 780

$40,000 to $50,000..................... 607 2,452 395 3,819 433 1,322

$50,000 to $75,000..................... 2,260 10,996 1,689 16,095 1,760 6,297

$75,000 to $100,000.................... 2,643 15,922 2,098 20,644 2,172 8,797

$100,000 to $200,000.................. 7,593 60,163 6,471 80,597 6,663 37,559

$200,000 to $500,000.................. 4,711 44,795 4,158 71,775 4,393 38,887

$500,000 to $1,000,000............... 852 8,307 702 15,908 816 15,457

$1,000,000 and over.................... 478 4,659 335 8,957 465 67,843

Total, All Taxpayers................. 20,043 150,943 16,466 225,008 17,245 177,414

[1] The income concept used to place tax returns into income categories is adjusted gross income (AGI) plus: (1) tax-exempt interest, 

 (2) employer contributions for health plans and life insurance, (3) employer share of FICA tax, (4) worker's compensation, 

 (5) nontaxable Social Security benefits, (6) insurance value of Medicare benefits, (7) alternative minimum tax preference items,

 (8) individual share of business taxes, and (9) excluded income of U.S. citizens living abroad. Categories are measured at 2018 levels.

Source: Joint Committee on Taxation staff estimates.

Table A-10.─Distribution of Selected Itemized Deductions, 2018 (Projected)

Income Category [1] Mortgage Interest Deduction

Charitable Contribution 

Deduction

State and Local Income, Sales, 

and Personal Property Tax 

Deduction