Here's the Average American Household Income -- How Do You Compare?

By Matthew FrankelCareerFool.com

According to the U.S. Census Bureau, the average household income was $73,298 in 2014, the latest year for which complete data is available. However, this doesn't tell the whole story. Depending on your family situation and where you live, average household income can vary dramatically.

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The average American household income

As I mentioned, the overall average household income was $65,751 in 2014. However, the average can vary significantly depending on your household's composition. For example, a single-person household earning $65,751 could have a completely different financial situation than a family of five with the same income.

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With that in mind, here's the average American household income by tax filing status:

Data source: IRS Statistics of Income, 2014.

Also note that the data in this and other tables in this article are adjusted gross income (AGI) figures, which is gross household income, minus a few specific adjustments. AGI excludes items such as deductible retirement contributions, student loan interest, and tuition and fees and is considered to be a good indicator of a household's actual pre-tax income.

Income distribution

Because very few people reading this, if any, will earn exactly the average income, here's a better way to determine where you stand. The IRS breaks up tax return data into income groups, so here's the percentile rank of each income threshold. To be perfectly clear, this refers to the percent of people whose household income is less than the threshold.

Data source: IRS Statistics of Income, 2014.

A few more averages

As I've mentioned, grouping all Americans into one big basket to find the average isn't always the most useful way to compare yourself. In general, the more you can narrow down the group, the more meaningful the average household income is.

For this reason, here are a few more income averages and statistics, which may be more useful to you for comparison purposes.

1. The median household income in 2014 was $53,719, which means that half of American households make less than this amount, and half make more. Since the median is significantly below the average, it tells us that there are more households with below-average household income than above-average, and that the average is distorted by a small percentage of high-income households.And this median is based on total income, not AGI, which accounts for a few deductions, so the difference is even bigger than this implies. In fact, if you look at the percentile chart earlier, you'll notice that the median AGI lies somewhere between $30,000 and $40,000. If you've heard anyone complain about "income inequality," this huge difference between the average and the median shows that it's a real issue.

2. Geographic location plays a big role in household income. To mention the two extremes, the median household income in Maryland is $70,004, nearly double that of Mississippi's $36,919.

3. Age also plays a big role:

Source: U.S. Census Bureau.

It's not about your income, it's what you do with it

It's entirely possible to become rich, even if your household income is well below average. Conversely, it's entirely possible to become poor if you earn a high income. I know plenty of people in both of those categories (unfortunately, more in the latter group).

As long as you live within your means and make saving and investing a priority, you can attain financial freedom, no matter how much you make. Of course, if you could use a little more income, there are some outside-the-box ways you may be able to bring in some extra cash.

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