U.S. households paying no income tax hit 61% of total last year

Nearly 61% of U.S households paid no federal income taxes during pandemic-stricken year of 2020, because of declines in income and boosts to government subsidies that wiped away tax liabilities, according to data from the Urban-Brookings Tax Policy Center.

The number of households owing nothing came in at 106.8 million, up from 75.9 million in 2019, the study, released Wednesday, showed. The 60.6% proportion for last year compares with 43.3% over the five years before the pandemic struck.

The number of families owing no federal income taxes is projected to remain high for 2021, at approximately 101.7 million households, or 57.1%, according to the estimates.

The data underscore how several federal assistance measures, including stimulus payments, tax-free unemployment benefits and expanded child tax credits completely offset the federal tax bills that many families would have otherwise owed during the pandemic.

Households making less than about $28,000 will not owe income taxes this year, nor will about three-quarters of families earning between $28,000 and $55,000, the Tax Policy Center found. About 43% of middle-income families will owe the IRS nothing on their earnings.

The federal government is unlikely to approve another round of stimulus payments. However, Democrats are pushing to renew an expansion to the child tax credit, which is set to expire at the end of this year. That could mean more families with children will see their tax bills cut.