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SOI Bulletin reports more high-income returns & growth in U.S. taxpayers’ foreign income

June 4, 2014

IR 2014-69

IRS has released the Spring 2014 issue of the Statistics of Income (SOI) Bulletin, which contains four detailed articles on tax matters pertaining to the 2011 tax year. The Spring 2014 SOI provides analysis on, among other things, the increase in high-income tax returns and trends in individual foreign-earned income.

Background. The SOI Bulletin is produced on a quarterly basis. It provides the most recent data available from various tax and information returns filed by U.S. taxpayers.

The Spring 2014 SOI is a 180-page report featuring detailed articles on the following topics, each pertaining to the 2011 tax year: what the Bulletin calls “individual income tax rates and shares”; high-income tax returns; individual noncash contributions; and individual foreign-earned income and foreign tax credit. Highlights of each are covered below.

Individual income tax rates and shares. The Spring 2014 SOI showed that for the 2011 tax year, taxpayers filed 145.4 million individual income tax returns. 91.7 million of these returns, or 63.1%, were “taxable returns,” i.e., returns that showed a total income tax greater than $0—the third lowest percentage in more than 25 years, with 2009 having been the lowest at 58.3%.

Adjusted gross income (AGI) on taxable returns increased 6.2% to $7.69 trillion for 2011, while total income tax increased 9.9% to $1.05 trillion. The average tax rate for taxable returns increased 0.5 percentage points to 13.6%.

For 2011, liability under the Alternative Minimum Tax (AMT) increased 11% to $30.5 billion (from $27.5 billion in 2010). The number of returns subject to paying the AMT increased by 200,000, and alternative minimum taxable income (AMTI) for all returns filing a Form 6521, Alternative Minimum Tax—Individuals, increased 12.6% to $2.3 trillion.

The Spring 2014 SOI show that for 2011, the returns in the top 1% reported 18.7% of total AGI and 35.1% of income tax. The amount of AGI needed for inclusion within this percentile group was $388,905. The returns in the top 5% group (returns reporting AGI of $167,728 or more) reported 33.9% of total AGI and 56.5% of income tax.

High-income returns. The Spring 2014 SOI showed that for 2011, taxpayers filed 4.7 million returns showing AGI of $200,000 or greater. This represented about 3.2% of all returns filed for the tax year. Of these 4.7 million returns, 7,557 showed no worldwide income tax liability—a 6.1% decline from 2010.

The Spring 2014 SOI also noted that, based on “expanded income” (rather than AGI), the number of high-income returns for 2011 was 4.8 million, representing about 3.3% of all returns filed. Expanded income—a more comprehensive measure of income than AGI—is AGI plus tax-exempt interest, nontaxable Social Security benefits, excluded foreign-earned income, and items of tax preference for alternative minimum tax (AMT) purposes, less unreimbursed employee business expenses, moving expenses, investment interest expense to the extent it does not exceed investment income, and miscellaneous itemized deductions not subject to the 2%-of-AGI floor. Adjusting for inflation, under the expanded-income concept, the Spring 2014 SOI showed that the number of high-income returns is 7.5 times as large as for ’77.

Of these 4.8 million returns, 15,000 returns had no worldwide income tax liability. This was a 6.7% decline in the number of returns with no worldwide income tax liability from 2010, and the second decrease in a row since reaching an all-time high of 19,551 returns in 2009.

Under either measure (i.e., AGI or expanded income), the number of high-income returns filed in 2011 reflects a 9.4% increase from those in 2010.

Individual noncash charitable contributions. For the 2011 tax year, the 22.5 million individual taxpayers who itemized deductions reported $43.6 billion in noncash charitable contributions. The average donation amount for noncash contributions increased 7.3% from $4,790 per return in 2010 to $5,140 in 2011.

7.5 million of these taxpayers reported $38.7 billion in charitable contribution deductions using Form 8283, Noncash Charitable Contributions (which is used when noncash donations exceed $500). This number of Form 8283 filers increased 3.3% from tax year 2010.

For 2011, large organizations received the most in donations (25.3%), followed by foundations (22.7%). However, foundations received the largest average donation per return ($114.478), with donor-advised funds receiving the second largest average donation ($79,675). Donations to most donee types increased between 2010 and 2011.

For both 2010 and 2011, corporate stock donations represented the largest amount and percentage of total donations claimed by taxpayers—for 2011, $16 billion (or 41.2%), up 19.5% from $13.4 billion claimed in 2010. The next largest types of noncash charitable contributions were for clothing ($9 billion, or 23.3%) and household items ($3.6 billion, or 9.3%). These donations also increased from 2010 levels, by 8.4% and 11%, respectively.

Individual foreign-earned income and foreign tax credit. For the 2011 tax year, nearly 450,000 U.S. taxpayers living abroad reported just over $54.2 billion in foreign-earned income, of which salaries and wages comprised 76.7%. The average foreign-source salary for a taxpayer filing Form 2555 (with wages) was approximately $116,858.

U.S. taxpayers claimed more than $28.3 billion as a foreign-earned income exclusion on their tax returns for the year, and the number of returns with the exclusion increased 34.2% from 2006 (the last time that this study was done). Asian-based U.S. taxpayers reported the largest amount of total foreign-earned income ($24.9 billion, or 46%) from any continent for 2011, an increase of 52.2% from the amount reported for 2006. The second largest amount was claimed by European-based U.S. taxpayers ($14.4 billion). Over 60% of all taxpayers reporting foreign-earned income had no U.S. income tax liability for 2011.

For 2011, U.S. individual taxpayers claimed a total of nearly $16.5 billion in foreign tax credits from approximately 6.9 million returns. These credits were based on a reported $170 billion in foreign-source gross income and $22 billion in foreign taxes paid or accrued. European countries collectively made up the largest recipient of foreign taxes paid or accrued ($8.3 billion), with the United Kingdom accounting for over half ($4.4 billion) of this amount.

Next issue. IRS stated that it plans to include articles on the following topics in the Summer 2014 SOI Bulletin: foreign-controlled domestic corporations (2011); and corporate foreign tax credit (2010).