Exploring the Internal Revenue Service Statistic Tables for Connecticut 2019-2020
The IRS makes data available for returns filed each year. This data can be found at SOI Tax Stats (Statistics of Income). With all the changes in the last few years in tax policy and policies and changes during the pandemic, we wondered what we could learn about income tax returns by examining different standards and itemized deductions for Connecticut. The analysis in this blog post looks at the change between 2019 and 2020.
Number of Tax Returns in Connecticut by Income Bracket
The total number of tax returns filed between 2019 and 2020 increased by 3.5% (n=64,410). According to tax return statistics from 2018 to 2020, there was an increase in the total number of returns filed in 2020 compared to the previous year.
Returns with an adjusted gross income (referred to simply as “income brackets”) of under $ 1 saw a rise of 130%. Reasons someone might report under $1 income:
Negative Income such as business or professional net loss.
Having adjustments larger than the income.
Returns for those of $25,000 to under $50,000 and over $1 million increased by 5%.
Standardized Deductions
The total number of itemized returns decreased by 11%, and the dollar amount for itemized returns decreased by 12% or $1.2 billion.
The standard deduction is a specific dollar amount that reduces the amount of taxable income. The standard deduction consists of the sum of the basic standard deduction and any additional standard deduction amounts for age and/or blindness.
The number of returns using the standard deduction grew by 4%, representing an increase of 1.6 billion, a 6% increase.
Student Loans Reported
From 2019-2020 the number of tax returns that reported having student loans decreased by an average of 17.5%, except for the income bracket of under $1, which saw an increase of 8.25%. The total dollar amount for student loan interest also decreased by $74.831 million.
In addition, each income group's average student loan interest fell by 28%. This decrease in student loan deductions and the total dollar amount of student loan interest paid was likely due to the pandemic, as many people deferred their payments.
Charitable Contributions Reported
Charitable contributions decreased for all income brackets except those with an AGI between $1 and $10,000 and those over $1,000,000. It's worth noting that the average amount of charitable contributions increased in each income bracket. However, the overall number of returns with charitable contributions has decreased by 13%. The middle-income brackets saw a decrease in charitable giving, while the highest earners increased their giving from 2019 to 2020 by 10%.
Personal Property Deductions Claimed
In 2020, personal property deductions declined 15% across all income brackets compared to the previous year. However, the average deduction per income bracket increased by $8,000. Notably, the bracket of $1 to under $10,000 saw the largest increase in the average deduction amount, with an increase of $1,600 from 2019 to 2020.
Mortgage Interest Reported
Returns with mortgage interest fell for all categories except for those with over $1,000,000, whereas returns with personal property taxes fell by 15%. The total interest payments for both fell by 413.663 million dollars and $16.119 million, respectively. Because you can only deduct mortgage interest if you itemize, many filers are paying mortgage interest, but that amount is unknown.
Retirement Savings Reported
Self Employment Retirement plans increased in all plans except for the second highest income group which decreased by 3,084 which represents about 2% of the returns. Interestingly, the $200,000 to $500,000 group saw a decrease in the number of returns. However, the number of payments increased. For all groups that are under $50,000, payments increased 20-35%.
However, when we look at the self-employment retirement savings, we see a mixed trend. While the savings have increased in most income groups, there are two exceptions. The first exception is the $500,000 to $1,000,000 self-employment income group, where the self-employment retirement savings fell by 3,000,000 dollars. The second exception is the under $1 income group, which also showed a decrease in self-employment retirement savings.
Overall, these trends suggest that people are becoming more cautious and selective in their retirement-saving decisions, especially those with higher income levels.
Conclusion
All in all, these statistics reveal interesting insights about the financial behavior of taxpayers in Connecticut. While some areas, such as charitable contributions, saw a decline in overall participation, the average amount of contributions increased. On the other hand, returns with mortgage interest and personal property taxes decreased for all categories except the highest earners, likely due to the changes in standard deductions. We are unable to tell from these data whether these trends indicate the impact of economic and social factors on personal finances or are simply due to changes in tax law.
About the Dataset
The IRS Statistics of Income (SOI) program is a detailed data collection initiative managed by the Internal Revenue Service (IRS). The program provides statistical data on various aspects of the U.S. tax system, economy, and society based on tax returns and other related documents. Here are key points about the IRS SOI program:
Purpose and Scope
Data Collection and Analysis: The SOI program collects data from individual, corporate, estate, gift, and international tax returns. It aims to provide high-quality and detailed statistical information on the tax system.
Public Policy and Research: The data is used by policymakers, researchers, and the public to understand tax policy implications, economic trends, and social changes. It helps in making informed decisions and policy evaluations.
Types of Data
Individual Income Tax Returns: Provides data on income, deductions, credits, and taxes for individuals.
Corporate Tax Returns: Includes information on corporate income, deductions, credits, and taxes.
Estate and Gift Taxes: Data on the value of estates and gifts, taxes paid, and related financial information.
Exempt Organizations: Information on organizations exempt from income tax, including charities and other non-profits.
International Taxation: Data on foreign income and taxes of U.S. persons and entities, and the activities of foreign persons and entities in the U.S.
Publications and Reports
Annual Reports: The SOI publishes annual reports summarizing data from various tax returns. These reports include tables, charts, and analyses.
More Information to come:
Over the next several months, we plan to dive deeper into each of the topics discussed in this blog.
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