Who Pays No Income Tax?

Nearly half of all families and individuals will pay no income tax this year. But who are they? It turns out that whether a taxpayer is single or married, is elderly, or has children makes a big difference. Nearly 47 percent of single tax units will owe no tax, compared with about 40 percent of joint filers and over 70 percent of household heads. About 55 percent of the elderly and tax units with children will pay no tax. Two factors primarily explain the variation: differences in income and available tax preferences.

Income is an obvious driver—virtually no one with income under $10,000 pays tax after taking the standard deduction and personal exemptions. The percentage of non-taxpayers in each category falls as income rises and top-bracket taxpayers almost always pay something. Still, a small percentage of those making a million dollars or more a year pay no income tax.

Singles and household heads earn a lot less than joint filers: their average income is under $30,000 compared with nearly $75,000 for couples filing jointly and they are much more likely to avoid paying income tax. Overall, over three-fifths of units with income between $20,000 and $30,000 pay no tax, compared with just one-fifth of those with income between $50,000 and $75,000.

Filing status also matters because of differences in exclusions, deductions, and credits. Among those with income between $40,000 and $50,000, for example, nearly three-fourths of joint filers, two-thirds of households with children, and three-fifths of the elderly owe no tax, compared with less than half of household heads and less than a tenth of singles. The impact of refundable child and earned income credits and the exclusion of most Social Security benefits clearly make their mark.