Economy

Here’s How Your Tax Day Stacks Up

It’s the most wonderful time of the year! Tax season, that is.

And today is IRS Christmas.

Curious to know how your taxes stacked up? While we won’t know about 2016’s filings until next year, IRS preliminary data from 2015’s filings (what you submitted in 2016) can shed some light on the typical American taxpayer’s contribution.

First off, the IRS received over 150.5 million tax returns last year, some 88 percent of which were filed electronically. (Sign of the times, to be sure.) Combined, U.S. taxpayers earned $10.17 trillion in adjusted gross income — meaning a total tax liability of $1.52 trillion.

This suggests a 14.3 percent federal tax rate. While that looks to mean the average taxpayer forked over $9,655, Motley Fool pointed out that this data is skewed by the Earned Income Tax Credit (EITC). Removing those folks from the equation leaves us with 99 million federal taxpayers. This means that federal income tax paid in 2015 averaged to $14,654.

Taking state and local income taxes into account makes things a bit trickier. For instance, seven U.S. states don’t charge residents income tax. Two others, New Hampshire and Tennessee, don’t have income tax either, though residents pay tax on dividends and investment income.

But for the average American, the U.S. Census Bureau pegs the average state and local income tax rate at just about 9.9 percent. Combine this and federal with a typical social security tax of 6.2 percent and a 1.45 percent rate for medicare, and you get the (rough) average tax rate estimate of 31.85 percent, or $20,944.

Obviously, this estimate doesn’t apply to everyone. Taxpayers who see enough annual income pay more than 31.85 percent in federal income tax alone.

As to where potential tax refunds might be going, research conducted by the National Retail Federation (NRF) and Prosper Insights & Analytics suggest a majority of taxpayers plan to put refunds in savings (48 percent) or use it to pay down debt (35.5 percent).

Happy tax day to all, and to all a good refund!

——————————

NEW PYMNTS DATA: HOW WE SHOP – SEPTEMBER 2020 

The How We Shop Report, a PYMNTS collaboration with PayPal, aims to understand how consumers of all ages and incomes are shifting to shopping and paying online in the midst of the COVID-19 pandemic. Our research builds on a series of studies conducted since March, surveying more than 16,000 consumers on how their shopping habits and payments preferences are changing as the crisis continues. This report focuses on our latest survey of 2,163 respondents and examines how their increased appetite for online commerce and digital touchless methods, such as QR codes, contactless cards and digital wallets, is poised to shape the post-pandemic economy.

Click to comment

TRENDING RIGHT NOW