who-is-not-paying-taxesWhile taxes are supposedly a part of life for all Americans, how is it possible that in 2009 almost half of all households paid no federal income tax? The Tax Policy Center released that an astounding 47% of Americans did not pay this year and even though this percentage is particularly high this year, the average of households that do not pay generally falls around 40%. Since we all benefit from the investments of tax dollars such as education, national defense and transportation systems it seems only fair that everyone should offer some sort of contribution, especially when it seems like for those of us who do pay, taxes are only getting higher. Here are just a few of the credits that help contribute to this growing percentage:

Income Tax Credits

This tax credit it targeted towards those with lower household incomes and is taken advantage of by millions each year. In fact, this past year the Internal Revenue Service estimates that 1 in 6 American taxpayers were able to claim this on their returns. In 2008, this large ratio cost the government over $40 billion. Perhaps the most unnerving part about this credit, however, is that a lot of the households that file for this credit did not owe any taxes to begin with meaning a big check from the government with their names. So not only are some people exempt from paying taxes altogether but they are actually receiving money, or rather our tax dollars from the government?

Homeowner Deductions and Credits

The U.S. government has always promoted home ownership and sought to encourage this through tax cuts and credits. The first time homeowner credit and mortgage interest deduction are the results of this. On average each year, these exceptions save those taxpayers who are lucky enough to qualify $130 billion.

Non-Wage Income

While the tax rates for the wealthy are climbing at an astounding rate, particularly taxes on salary it is important to note that of the total income reported by the very wealthy, less than 1/5 of it is generated from an actual salary. In fact, most of their reported income is incurred from capital gains and other ventures which are taxed at a far lower rate. The same is true for those in lower or middle tax brackets as well.

Now combine these popular three credits and deductions with others such as the child credit, those for education and personal exemption deduction and it is easy to see how many people quickly see their tax bill return to zero.