The number of those who pay no federal income tax is expected to drop to 34 percent of households in 10 years.
The number of U.S. households that pay federal income taxes is rising, the Tax Policy Center says. The center credits a better economy and the expiration of some tax cuts.
About 57 percent of households will pay federal income taxes for 2013, it estimates. In 2009, that figure was 53 percent.
That doesn’t mean those who will pay no federal income tax are tax-free. “Even if they don’t pay federal income tax, Americans almost all pay Social Security and Medicare payroll taxes, state and local sales taxes, excise taxes, or some other levy,” the Tax Policy Center says.
Most Americans pay more in payroll taxes for Social Security and Medicare than they do in federal income tax, it says.
Only 14 percent of households pay neither income nor payroll tax. Most of them are elderly, and nearly all of the rest are unemployed or have incomes less than $20,000, the Tax Policy Center says. “The remaining 1 percent mostly benefit from the tax code’s many exclusions, deductions, exemptions, and credits that wipe out the income tax they would otherwise owe,” it says.
The people with no federal income tax liability are mostly middle- or working-class people. Here’s the breakdown of who doesn’t pay, by income, according to a video released by the group:
- Incomes above $100,000 — 2.7 percent don’t pay federal income tax.
- Between $75,000 and $100,000 — 12.6 percent.
- $50,000 to $75,000 — 26.4 percent.
- $40,000 to $50,000 — 40.8 percent.
- $30,000 to $40,000 — 49.3 percent.
- $20,000 to $30,000 — 66.2 percent.
- $10,000 to $20,000 — 86.2 percent.
- Less than $10,000 — 99.5 percent.
Of course, just because you have zero income tax liability doesn’t necessarily mean you can skip filing. It might mean that you can get free tax help, though. Check out how in the video below:
The center projects that the number of people who don’t owe federal income taxes will continue shrinking, to 34 percent of households in 2024, CNNMoney says.