More On Tax Planningfrom The Advisor's Professional Library
- IRAs: In General Individual Retirement Accounts are highly popular tools for contributing funds that grow on a tax deferred basis. Depending on the type of IRA, the accumulation can be tax free.
- Health Insurance: Health and Medical Savings Accounts A Health Savings Account is a trust created exclusively for the purpose of paying qualified medical expenses of an account beneficiary. Although they are popular, they are not without their pitfalls and the regulations can be complicated. Learn more about how to avoid federal taxation on the accumulation and distributions of HSA.
The number of high-earning U.S. taxpayers who did not owe income tax in 2008 shot up by nearly 80% from the previous year, according to the spring 2011 edition of the Statistics of Income (SOI) Bulletin, released June 14 by the IRS.
The latest edition of the bulletin shows that taxpayers with adjusted gross incomes (AGI) of $200,000 or more filed nearly 4.4 million returns in 2008, 3.1% of total returns filed. Of those, 18,783 filers (0.4% of the high-income total) avoided paying U.S. income taxes by using legal deductions, credits and exemptions, compared with 10,465 (0.2%) who owed no tax in 2007.
A further 10,824 owed no worldwide income tax in 2008, up from 4,841 a year earlier.
These totals and percentages are the highest recorded by the bulletin whose data go back to1977. That year, 60 taxpayers (0.1%) with AGI of $200,000 or more paid no U.S. income taxes.
The bulletin also showed that another group of high-income taxpayers, “nearly nontaxables,” was able to offset a significant portion of its income before being subject to tax. These high expanded-income taxpayers (determined by items reported on tax returns that provide a more comprehensive measure of income than AGI) pay income tax equal to only a small share of his or her income.
In 2008, around 0.9% of high expanded-income taxpayers who reported at least some worldwide tax liability were able to reduce their adjustable taxable income to less than 25% of their expanded income.