The US economy is showing both record incomes and increasing pressure on family budgets. The real median income of American households increased by 2.6% in 2025, reaching $87,460. The amount is adjusted for inflation and is the highest since the indicator began to be tracked.
The country's gross domestic product is expanding at an annual rate of 2.2%, indicating continued growth. However, these data do not give the full picture of how households are doing, as the average score masks differences between individual income groups.
Higher incomes, but also higher costs
The Institute for Taxation and Economic Policy calculated the combined effect of three changes: President Donald Trump's tax cuts, the expiration of additional health insurance subsidies and higher-than-expected inflation.
According to the institute's analysis, price pressures are related, among other factors, to tariffs and the conflict with Iran. This means that some of the benefit of lower taxes is wiped out by higher prices for goods, fuel and health care.
“Tax cuts are being eaten up by higher prices and health care costs for most families,“ said Steve Wamhoff, ITEP’s federal policy director.The richest benefit the most
ITEP estimates that the middle 20% of Americans will pay an average of about $1,700 more in 2026 due to a combination of tax changes, prices and health care costs. For the poorest 20%, the additional burden is about $750 per household, on average.
According to the analysis, the richest 1% is the only income group that benefits net from the policies under consideration. For the rest of the households, the price increases and the loss of health subsidies outweigh the effect of the tax cuts.
This means that the record median income does not equate to an equal improvement in purchasing power. The 2025 data shows what households received, while the ITEP analysis focuses on how policies and prices change their real costs in 2026.
Sources: bbc.co.uk