Many lower- and middle-earning households may pay nothing in income taxes this year

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Taxpayers with income under $75,000 are projected to have no tax liability after deductions and credits for 2021, according to a congressional report.
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A large swath of American households may pay nothing in income taxes for 2021, a new congressional report suggests. Taxpayers with income of less than $75,000 are projected to have, on average, no tax liability after deductions and credits when they file their 2021 returns next spring. They will also will get money back from the IRS, according to recent estimates from the nonpartisan Joint Committee on Taxation. For taxpayers earning $75,000 to $100,000, the average income tax rate paid this year is expected to be just 1.8%.

Estimated distribution of 2021 income taxes Individual income Projected average income tax rate, 2021 Under $75,000 <0% $75,000-$100,000 1.80% $100,000-$200,000 5.70% $200,000-$500,000 13% $500,000-$1 mil 20.80% Over $1 mil 25.80%

"The main drivers for nonpayers are the [earned income tax credit] for lower earners and the child tax credit for families with children after accounting for the standard deduction," said Garrett Watson, a senior policy analyst at the Tax Foundation. While having a zero tax bill is not a new phenomenon, it may be more pronounced this year due to a variety of temporary tax code changes, said…
Sarah O'Brien
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