Make Over $200,000 And Pay No Income Tax?
At least that is what these people did:
New IRS statistics show 7,389 federal tax returns with $200,000 or more in adjusted gross income reported no federal income taxes in 2005. That’s a 161% jump from the 2,833 comparable returns filed in 2004. Additionally, 4,224 of the over-$200,000 earners reported no worldwide income tax liability on their 2005 returns, the IRS data show. That represents a 75% increase from the 2,420 comparable returns filed in 2004.
Isn’t that grand! 7,389 people making more than $200K a year did not pay income taxes while the rest of us schlubs covered some of the difference. Gotta love the American tax system and it’s ginormous loopholes!
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Ken | Jun 12, 2008 | Reply
Man i want to see one of these tax returns. That way i can figure out what i should do to avoid taxes.
Jeremy | Jun 12, 2008 | Reply
That’s why any time a politician proposes to increase the taxes on the rich, they will probably end up losing even more tax revenue as the wealthy find even more ways to shelter their money.
Our system is terribly flawed, and just fiddling with percentage increases on certain income brackets will never solve anything. We need some real tax code reform.
David | Jun 12, 2008 | Reply
Unfortunately, avoiding taxes results in no schools, bad roads, no airlines, no oil, no police, no fire, no….
I agree Jeremy - the entire thing needs to be ditched - but it never will be, as too many people depend on it staying as-is. A friend of mine works for the state of CA and says that you get in trouble if you actually do your job or try to improve things - the goal there is to do as little as possible, keep your job forever, never raise an eyebrow, and retire on our tax dollars. That’s it - there will never be real reform, I am afraid.
Mrs. Micah | Jun 12, 2008 | Reply
If I had $200,000 a year right now, I’d be happy to pay the taxes. But that’s mostly because it’s maybe 9x what we made last year.
Crybaby | Jun 13, 2008 | Reply
*waaahhhh* People have money and stuff I don’t have. *waaahhhh*
I want tax loopholes too but I don’t bother to give to charities because I need to fuel my giant SUV and pay for my premium satellite package.
It just isn’t fair!
I’m going to vote for whomever promises to stick it to the rich!!! Those jerks!!! (Even if it means MY tax breaks will go away too.) Eep!
*sniff*
dogatemyfinances | Jun 14, 2008 | Reply
I’m guessing this “loophole” is charity. People who already made their money and donate what comes in.
Dividend Growth Investor | Jun 16, 2008 | Reply
Or people who are 100% invested in Muni Bonds. Lol
Whiners unite! | Jun 19, 2008 | Reply
Okay, I don’t condone tax evasion and loopholes, but stop to consider this: You’re on a modest to low income, you scrimp and save in every way possible. Even your kids start work at a very early age (say 10, then at 14, a legal, taxable job). You encourage your kids to go to college so they can have better opportunities than you. They do (via financial aid, working, loans, etc). They come out of college with a degree that literally opens doors. Fifteen years later, your kids have a family and their household income tops $200k. Are you going to begrudge them their hard-earned financial situation? Guess what? I’m one of those kids. So for those of you who want to “stick it to the rich”, consider that their earnings didn’t come from the money tree, but hard work. I happily pay my taxes because I’m thankful for what I have and I DON’T MIND, but I do get mighty tired of everyone and their mother putting their sticky fingers into my wallet and taking more and more and more, simply because I can afford it. The people you should begrudge are the big businesses that have oodles of tax shelters and benefits. Oh, and my mom’s modest income? No more than $6,000 in a year.
Steve D | Oct 21, 2008 | Reply
So, rather then rant and complain I looked at the tax code. How could they do that?
There are only a few basic ways that you can have an AGI of over $200k and pay no taxes. The main place is in schedule A. For example if you earn $220k but have to pay $300k in out of pocket medical you would have no tax liability. If someone stole $230k from you then again you’d have no tax liability. In other cases the home mortgage interest, property tax, state income tax can help reduce the liability to zero. Gifts to charity also apply - I would think this would be somewhat common in the case of some 70year old with 5mil giving away a $300k per year.
Outside of schedule A there is a little list on the 1040.
Other items that would contribute:
District of Columbia. first-time homebuyer credit
Qualified Adoption Expenses
AMT credit
Child tax credit
residential energy credits
education credits
credit for elderly and disabled
credit for child care
retirement savings credit
foreign tax credit (for taxes earned and paid in a foreign country that are also taxed in the us.)
Then there is a whole pile in the business side - form 3800:
welfare to work for hiring certain folks,
disabled access credit
renewable electricity credit
bio-diesel credit
distilled spirits credit.
Messy - yes. Some specific stupid programs yep. Big easy loopholes for the evil rich to get out of paying taxes - not so much. A good argument for massive tax simplification - Yes. It’s not easy to trust that its even close to fair that way it is now. Plus the little stupid things encourage lobbying and corrupting the system. So, bad - but not quite the evil it’s portrayed to be.