American Tax Brackets & US Tax Requirements

American tax brackets refer to the progressive tax rate system used in the United States to determine the amount of income tax owed by individuals, including U.S. expatriates living in the UK. These brackets divide taxpayers into income ranges, each with a corresponding tax rate, with higher income levels typically subject to higher tax rates. Understanding American tax brackets is crucial for U.S. expatriates to calculate their tax liability accurately.

Key Points:

Progressive Tax System:

The United States employs a progressive tax system, which means that as an individual’s income increases, their tax rate also increases. This system is designed to distribute the tax burden fairly based on an individual’s ability to pay.

Tax Rates and Income Ranges:

American tax brackets are structured into income ranges, and each range is associated with a specific tax rate. As of my last knowledge update in September 2021, there were several tax brackets, with rates ranging from 10% to 37%, depending on the income level.

Taxable Income:

To determine the tax owed, individuals first calculate their taxable income, which is their total income after accounting for deductions and exemptions. This taxable income falls into the relevant tax bracket to calculate the tax liability.

Impact on Expatriates:

U.S. expatriates living in the UK are subject to the same American tax brackets as U.S. residents. They must report their worldwide income, including income earned in the UK, and use the appropriate tax bracket to calculate their U.S. tax liability.

Foreign Earned Income Exclusion and Foreign Tax Credits:

U.S. expatriates living in the UK may be eligible for tax benefits, such as the Foreign Earned Income Exclusion or the Foreign Tax Credit, which can help reduce their U.S. tax liability. These benefits can affect the effective tax rate they ultimately pay.

Tax Advisory Services from Xerxes Associates LLP:

Firms like Xerxes Associates LLP specialize in providing tax advisory services to U.S. expatriates, helping them understand how American tax brackets apply to their unique situations and assisting with tax planning and compliance.

In summary, American tax brackets represent the progressive tax rate structure used in the United States. U.S. expatriates living in the UK are subject to these brackets and must accurately determine their tax liability by identifying the appropriate tax bracket for their taxable income. Tax advisors like Xerxes Associates LLP can assist expatriates in navigating these brackets, optimizing their tax situation, and ensuring compliance with U.S. tax laws.

Contact us via or fill out our contact form to discuss your expat tax situation with us.

Read more here: Xerxes US Expats Living & Working in the UK Blog.