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Who Doesn't Pay Federal Taxes? A Peek at the Numbers

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By Lisa Mahapatra

Only 14 percent of U.S. residents pay neither income tax nor payroll taxes, and most of them are elderly or make less than $20,000 in annual income, according to a new report from the Tax Policy Center.

The number of people who pay both federal income tax and payroll tax increased from 53.1 percent in 2011 to 56.7 percent in 2012. This is likely due to an improving economy and the expiration of temporary recession tax cuts, according to the Tax Policy Center report.

Twenty-nine percent don't pay federal income tax but do pay payroll tax. Even the 14 percent who pay neither payroll tax nor income tax do pay Social Security, state and local taxes or some other tax, the report said.

And the remaining 1 percent mostly benefit from the tax code's many exclusions, deductions, exemptions and credits that wipe out the income tax they would otherwise owe, according to the report.

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Cities with the Lowest Tax Rates

The total amount of tax you pay reaches far beyond what you owe the federal government. Depending on where you live, most likely you're required to pay additional taxes, including property and sales tax. The disparity between the amount of tax you pay in a low-tax city and that in a high-tax city can be dramatic. Living in any of these 10 cities could save you a bundle, although the exact amount may fluctuate based on your income and lifestyle choices.

Cities with the Highest Tax Rates

Much ado is made in the press about federal tax brackets, but cities can carry a tax bite of their own. Even if you live in a state that has no income tax, your city may levy a variety of taxes that could eat away the entire benefit of living in an income tax-free state, including property taxes, sales taxes and auto taxes. Consider all the costs before you move to one of these cities, and understand that rates may change based on your family's income level.

Great Ways to Get Charitable Tax Deductions

Generally, when you give money to a charity, you can use the amount of that donation as a deduction on your tax return. However, not all charities qualify as tax-deductible organizations. While there are many types of charities, they must all meet certain criteria to be classified by the IRS as tax-deductible organizations. There are legitimate tax-deductible organizations in many popular categories, such as those listed below.

A Freelancer's Guide to Taxes

Freelancing certainly has its benefits, but it can result in a few complications come tax time. The Internal Revenue Service considers freelancers to be self-employed, so if you earn income as a freelancer you must file your taxes as a business owner. While you can take additional deductions if you are self-employed, you'll also face additional taxes in the form of the self-employment tax. Here are things to consider as a freelancer when filing your taxes.

Tax Deductions for Voluntary Interest Payments on Student Loans

Most taxpayers who pay interest on student loans can take a tax deduction for the expense ? and you can do this regardless of whether you itemize tax deductions on your return. The rules for claiming the deduction are the same whether the interest payments were required or voluntary.

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when I worked they took my tax money.union dues.fica ss etc.with a shovel.now retired they give it back with a spoon.

September 10 2013 at 7:14 AM Report abuse rate up rate down Reply

article seems to presume paying taxes with our money is the highest good? is it?

September 08 2013 at 6:44 AM Report abuse rate up rate down Reply

Look to the 5 billion tax benefits the oil companies receive thanks to the GOP. Exxon-Mobile paid no incomes taxes last year and received a check from the irs of 187 million dollars. Do we call this fair? The GOP does. Look at all the billions the oil companies made in profits. Our tax system has a lot to clean up and this is one of them. On social security and medicare, thank a democrat.

September 08 2013 at 3:28 AM Report abuse +1 rate up rate down Reply
1 reply to toosmart4u's comment

Go ahead and tax the big companies all you want. Who will pay for the decrease in profits.. YOU...DA

September 08 2013 at 4:10 AM Report abuse rate up rate down Reply

Just about everyone pays taxes, but think of what you are getting today because of it, look at what your taxes provide, yes I can agree the tax system needs alot of change to it especially in the amount citizens are paying verses there income but those who expect a free handout just because they live in America need to get their head examined.

September 08 2013 at 12:19 AM Report abuse rate up rate down Reply

Retirement income, coming from whatever source, i.e. Social Security, IRA or Pension should be tax free. This change should be part of a serious overhaul of our tax code that increasingly favors people in the higher earnings brackets.

September 07 2013 at 11:50 PM Report abuse +1 rate up rate down Reply

The biggest loser: The poor middle class homeowner who has to pay high Federal and State taxes and then is crucified with never ending increases in their Real Estate taxes and gets no Federal and State aid to help their kids pay for college and health care.

September 07 2013 at 11:13 PM Report abuse +2 rate up rate down Reply

But what you do not tell is the hugh tax returns for people that pay no income tax with the child credit, unearned income credit, etc.
And it is paid to illegals that claim children not living in this country.

September 07 2013 at 10:52 PM Report abuse +3 rate up rate down Reply

they left out the illegal aliens who are paid under the table.

September 07 2013 at 8:06 PM Report abuse +2 rate up rate down Reply

I am ok with the elderly and or very poor not paying. Everyone else needs to pay up.

September 07 2013 at 6:57 PM Report abuse +4 rate up rate down Reply

So this would be the famed 1% then?

September 07 2013 at 5:52 PM Report abuse +4 rate up rate down Reply