![]() ![]() Credit amounts began phasing out at $75,000 for single filers, $112,500 for head of household filers, and $150,000 for joint filers. The second provided $600 for single filers, $1,200 for joint filers, and $600 for each qualifying child. The first round of payments provided $1,200 for single filers, $2,400 for joint filers, and $500 for each qualifying child. Two rounds of Recovery Rebates also reduced tax liability for qualifying taxpayers. As unemployment rose to record highs, lawmakers expanded unemployment benefits beginning in early 2020 and created a $10,200 income tax exclusion for the 2020 tax year, available to taxpayers with modified AGI below $150,000. Between 20, AGI dropped by 6.6 percent for the bottom half of taxpayers, while it increased by 7 percent for the top half of taxpayers. Typically, a recession lasts longer than six months, but recovery from a recession can take a few years.Ĭaused financial hardships for many lower- and middle-income households. The recession A recession is a significant and sustained decline in the economy. The pandemic-related downturn and relief programs both affect the 2020 data. Pandemic-Related Downturn and Relief Programs The result overstates the tax burden of the bottom half of taxpayers. Source: IRS, Statistics of Income, ”Individual Income Rates and Tax Shares.”īecause the Office of Management and Budget (OMB) classifies the refundable part of tax credits as spending, the IRS does not include it in tax share figures. Summary of Federal Income Tax Data, Tax Year 2020 Rate inched up slightly from 13.29 percent in 2019 to 13.63 percent in 2020. ![]() Though barely 100 years old, individual income taxes are the largest source of tax revenue in the U.S. The Federal Income Tax was established in 1913 with the ratification of the 16th Amendment. imposes a progressive income tax where rates increase with income. ![]() The average individual income tax An individual income tax (or personal income tax) is levied on the wages, salaries, investments, or other forms of income an individual or household earns. Total income taxes paid rose by $129 billion to $1.7 trillion, an 8 percent increase above 2019. Taxpayers reported more than $12.5 trillion in AGI on 157.5 million tax returns in 2020, an increase of $650 million in AGI and 9.3 million in returns above 2019. Reported Income and Taxes Paid Increased in Tax Year 2020 The 2020 figures include pandemic-related tax items such as the non-refundable part of the first two rounds of Recovery Rebates and the $10,200 unemployment compensation exclusion.The top 50 percent of all taxpayers paid 97.7 percent of all federal individual income taxes, while the bottom 50 percent paid the remaining 2.3 percent.The top 1 percent’s income share rose from 20.1 percent in 2019 to 22.2 percent in 2020 and its share of federal income taxes paid rose from 38.8 percent to 42.3 percent.The top 1 percent of taxpayers paid a 25.99 percent average rate, more than eight times higher than the 3.1 percent average rate paid by the bottom half of taxpayers. The average income tax rate in 2020 was 13.6 percent.In 2020, taxpayers filed 157.5 million tax returns, reported earning nearly $12.5 trillion in adjusted gross income (AGI), and paid $1.7 trillion in individual income taxes. ![]() Average tax rates for all income groups remained lower in 2020, three years after the Tax Cuts and Jobs Act, than they were in 2017 prior to the reform. Year 2020 shows the federal income tax system continues to be progressive as high-income taxpayers pay the highest average income tax rates. New Internal Revenue Service (IRS) data on individual income taxes for tax A tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. ![]()
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