If you earn less than $ 75,000 you may not pay federal taxes in 2021

By Sarah O'Brien - CNBC

If your income is less than $ 75,000 in 2021, you may not have to pay income taxes. 

On average, taxpayers in that category will not have to pay taxes after factoring in deductions and credits when they file their 2021 returns next spring, according to recent estimates from the Joint Committee on Taxation of Congress.

Those households could even get money back from the Internal Revenue Service (IRS).

Even for taxpayers making between $ 75,000 and $ 100,000 in 2021, the average income tax rate will be

1.8%

.

"The main drivers of non-taxpayers are the Earned Income Tax Credit for lower incomes and the Child Tax Credit for families who have them after accounting for the standard deduction," said Garrett Watson, an analyst at the Tax Foundation.

The standard deduction for 2021

for individual tax filers is $ 12,550;

for married couples filing jointly it is $ 25,100.

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Although having a zero tax bill is not a new phenomenon, it may be more pronounced this year

due to a variety of

temporary

changes

to the tax code, said Elaine Maag, a researcher at the Urban-Brookings Center for Tax Policy.

In addition to the stimulus checks for the COVID-19 pandemic of up to $ 1,400 per adult and dependent that were authorized in the Rescue Plan, several tax credits were extended.

These include the

Earned Income Tax Credit and the Child Tax Credit

.

Both credits are considered valuable, since they are refundable, which means that even if your tax bill is zero, you can get a refund of some or all of the credits.

Families will receive $ 300 for each minor child starting in July in the US.

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Congressional projections do not mean that everyone who earns less than $ 75,000 will pay nothing in taxes.

"There are a lot of people in that income

bracket

who

will owe taxes

," Maag said, "that's the averages for everyone."

Also, just because you don't have to pay the IRS anything for your income doesn't mean you don't have to pay federal taxes.

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For example, if you earn money from a job (rather than, for example, investments), you must pay Social Security and Medicare taxes.

So-called payroll taxes equal 7.65%, which your employer withholds from your pay and contributes the same amount to those programs on your behalf.

If you are self-employed, you pay both installments yourself, that is, 15.3%, although you can deduct half on your tax return.

About

53% of people had an annual household income of less than

$

75,000

in 2019, according to the latest data from Statista.

Median household income in the United States that year was about $ 68,700, according to the Federal Reserve Bank of St. Louis.

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May 27, 202 101: 54

"The group that does not pay federal income taxes in a given year is usually the

moderate income with children

, as well as the elderly, who may not have income that they pay taxes on," Maag said.

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On the details of the credits: The child tax allowance is improved for 2021 in several ways, including increasing the child payment to $ 3,000 from $ 2,000 for families with incomes below certain thresholds (the phase-out starts at $ 75,000 for singles, $ 112,500 for heads of household, and $ 150,000 for married couples, with an additional $ 600 for children under 6).

17-year-olds are also entitled to help

for the first time.

Those child tax credits will be advanced through direct payments starting in July.

The

earned income tax credit

for childless workers

has

also

been expanded

, raising the maximum credit in 2021 for that cohort to $ 1,502 from $ 543, according to the Tax Foundation.

The benefit will be effective when taxpayers file their 2021 returns in the spring of 2022.

The bill also increases the income level (from $ 4,220 to $ 9,820) beyond which the earned income tax credit peaks, and changes the phase-out to start at $ 11,610 instead of $ 5,280. for individual tax filers.

This year the ages to access the credit have also been modified

: The minimum age is 19 years instead of 24 and the maximum age of 65 years is eliminated.