Tax Minute

ZERO TAX

In 2020 60.6% of American households paid no Federal income tax. This was up from 43.3% in 2019. Here's an interesting question, if you make $200,000 a year, how much Federal income tax do you think you'll have to pay? Since 1976 the IRS has been required to report the number of individual income tax returns reporting $200,000 or more in income that report no Federal tax liability. According to the most recent IRS data of the over 7.7 million individual income tax returns that reported income of $200,000 or more in 2017, there were 22,266 who paid zero Federal income tax. Believe me, it doesn't get any better than zero. There is no one explanation for this miracle. It's usually a combination of factors, like large amounts of tax-exempt interest, medical bills, charitable contributions, casualty losses, business or investment losses or the Foreign Tax Credit. But the mere possibility of earning $200,000 this day and age and getting to pay zero tax highlights the number one problem of our current tax system; it treats those who make it, like those who don't, and that's not right.

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