Like all other residents, immigrants of all legal statuses are required to pay income, payroll, property, sales, or other taxes throughout the US. For example, most immigrants with wage earnings have income and payroll taxes deducted from their wages throughout the year and must comply with the IRS rules to file their taxes each year. Those who are homeowners or purchase most goods and services must pay state and local property and sales taxes on their expenditures.

There are only a few, specific tax liability exemptions for certain immigrants. Taxpayers that, for IRS purposes, are considered “nonresident aliens,” are exempt from paying Social Security and Medicare taxes on wages. This includes, but is not limited to, students that are employed under eligible conditions of their F-1, J-1, or M-1 visa status, specifically those who have been in the US for under five calendar years. These individuals are, however, still liable for all other federal, state, and local taxes at standard tax rates. And they have limited eligibility for certain tax benefits. For example, “nonresident aliens” are not allowed to claim the federal earned income tax credit (EITC), which largely benefits families with low to moderate incomes, or the lifetime learning credit, which can help offset certain educational expenses.

Since the IRS does not require taxpayers to report their nationality or legal status when filing their taxes, it is difficult to measure total tax payments, benefits, or liabilities of immigrants. Per the American Immigration Council’s analysis of US Census Bureau data, immigrant-led households in the US paid $492 billion in federal, state, and local taxes in 2019.

Contrary to common assumptions, undocumented immigrants, or those without a valid and unexpired visa or other form of legal status, also pay federal, state, and local taxes. Because they are not eligible for Social Security numbers (SSNs), the IRS requires these individuals to comply with federal tax reporting by issuing them individual taxpayer identification numbers (ITINs). Some survivors of domestic violence, Cuban and Haitian entrants, student visa holders, and certain spouses and children of those with employment visas also use ITINs. According to the Treasury Inspector General for Tax Administration, there were 5.4 million active ITINs in January 2021.

Per the IRS’ Taxpayer Advocate Service, over 2.5 million federal tax returns were filed by ITIN filers in 2019, with a total reported tax liability of nearly $6 billion. Additional estimates suggest that undocumented immigrants pay nearly $12 billion in annual state and local sales, excise, income, and property taxes (Gee et al. 2017). Undocumented immigrants also pay billions of dollars in federal payroll taxes that are withheld from their wages, even though they are not eligible to benefit from the Social Security and Medicare programs these revenues support (Goss et al. 2013).

Recent research from TPC has highlighted that even when certain undocumented immigrants are made eligible for tax benefits, such as the child tax credit (CTC), they can face various administrative barriers, including a maze of household eligibility requirements and processing delays from the IRS (Godinez-Puig, Boddupalli, and Mucciolo 2022).

Frequently debated are the short-term and long-term economic impacts of immigration in the US (NASEM 2017). According to a 2023 analysis by the Cato Institute, immigrants overall have a larger positive fiscal impact than native-born Americans when accounting for both groups’ incomes, taxes paid, and government benefits received; this is, in part, because immigrants on average pay more in taxes than they receive in government benefits at federal, state, and local government levels combined (Nowrasteh 2023).

Updated January 2024