The Internal Revenue Service and the Bureau of Labor Statistics publish detailed tables that quietly shape how experts talk about income class in the United States. Their data on adjusted gross income and household spending show who sits in the lower, middle, and upper parts of the income ladder, and how far those dollars go once basic bills are paid.
Instead of relying on a single national salary cutoff, these federal datasets sort tax filers and consumer units into percentiles and spending groups. The IRS tracks adjusted gross income, or AGI, for millions of tax returns in every state, while the BLS reports how households at different income levels spend their money each year. Taken together, these sources show that income class depends on where you live, how you file, and what your budget must cover each month.
Why AGI is the starting line
Public debates often reduce class to round income numbers, such as $50,000, $100,000, or $250,000 a year. Federal statistics instead rely on adjusted gross income, which is the income reported on Form 1040 after certain adjustments but before most deductions. The IRS Statistics of Income Division compiles this into state tables that show AGI percentile thresholds, so readers can see the AGI floor for the top 10 percent or the middle 40 to 60 percent of tax filers in each state. Because these figures come from administrative data on filed returns, they reflect what people actually report to the tax agency.
For tax year 2022, the IRS released AGI percentile floor values in U.S. dollars for every state and the District of Columbia. The percentile tables cover 46 states in a main summary file and list dozens of percentile cutoffs, including the 24th, 45th, and 75th percentiles, along with higher brackets such as the top 10 percent. In total, the state tables present 698 separate percentile entries for individual income tax returns, which allows analysts to approximate where lower, middle, and upper income bands begin and end in each state, even though the IRS does not label those bands as social classes.
Upper class: percentile, not a pay number
Researchers usually define upper income by position in the distribution, not by a single salary. A common approach is to treat the top 20 percent or top 10 percent of earners as upper income. The IRS AGI tables make this concrete by listing the AGI floor for each percentile range. If a filer’s AGI is above the floor for the top 20 percent in a given state in 2022, that filer earns more than at least four out of five tax returns in that state for that year.
The same logic applies at the very top of the distribution. The AGI floor for the top 1 percent in a high-income state can be several times higher than the median AGI in that state, while a lower-income state may have a much smaller dollar threshold and still count that level as locally elite. The IRS tables do not describe lifestyle or status, but they do mark the AGI levels that separate the highest 1 percent, 5 percent, or 10 percent of Form 1040 returns from the rest of the filing population.
Middle class: a band, not a line
Middle income is better understood as a band around the center of the distribution. Many studies treat households between the 40th and 60th percentiles, or sometimes between the 30th and 70th percentiles, as middle income. The AGI percentile tables by state show the floors for these ranges, which gives a clear sense of what counts as the middle in each location. In a state with high earnings, the AGI at the 50th percentile will be much higher than in a state with lower wages, even though both midpoints represent the same share of local filers.
That variation means a household earning the AGI that sits at the 50th percentile in one state might fall below the 45th percentile in another state, even when the dollar amount is identical. Because the IRS data is broken out by state, the same AGI can correspond to different class labels depending on where the return is filed. As a result, national debates that rely on a single “middle class income” figure often miss regional differences that can run to tens of thousands of dollars between states.
Lower class and the bottom percentiles
At the lower end of the income ladder, class labels overlap with policy terms such as low income and poverty. The IRS AGI tables do not define poverty thresholds, but they do identify the bottom 20 percent and bottom 10 percent of tax filers in each state. The AGI floor at the 20th percentile, for example, marks the point below which one in five filed returns report even less income for the 2022 tax year in that state.
Because the Statistics of Income data is based on Form 1040 filings, it omits some residents whose income falls below filing requirements or who rely mainly on non-taxable benefits. The lower percentiles in the AGI tables therefore describe the bottom of the filing population, not the entire adult population. Even with that limitation, the gap between the AGI floor at the 24th percentile and the floors for the middle or upper percentiles in many states highlights how far below the median many filers sit.
Spending patterns: when “upper” still feels tight
Income class also depends on what that income must cover. To see that side of the picture, analysts use the federal data on consumer spending. The Bureau of Labor Statistics publishes an annual release on consumer expenditures that reports average before-tax income and average annual spending by consumer unit, which is the term used for households and similar spending groups. The tables group these units by income level and show how much they spend on housing, food, transportation, health care, and other categories.
The BLS release on consumer spending includes more than 45 detailed line items for major expense categories and subcategories in the most recent year of data. Across these categories, housing and transportation consistently take large shares of the budget, and those shares often shrink only slowly as income rises. As a result, a household whose AGI places it in the top 20 percent of filers in a state can still feel financially stretched if local housing costs are high, commutes are long, or medical expenses are significant, even though the income looks upper tier on paper.
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*This article was researched with the help of AI, with human editors creating the final content.
Cole Whitaker focuses on the fundamentals of money management, helping readers make smarter decisions around income, spending, saving, and long-term financial stability. His writing emphasizes clarity, discipline, and practical systems that work in real life. At The Daily Overview, Cole breaks down personal finance topics into straightforward guidance readers can apply immediately.
