Yes, undocumented immigrants do pay taxes, and they pay a lot of them. Federal income tax, Social Security and Medicare payroll taxes, self-employment tax, state and local sales and excise taxes, and property taxes all apply regardless of a person’s immigration status. In tax year 2023, returns filed with an Individual Taxpayer Identification Number generated roughly $15.7 billion in federal tax payments, and about 3.8 million such returns were filed in tax year 2022.1National Taxpayer Advocate. IRS Processing of Individual Taxpayer Identification Numbers Those figures leave out payroll taxes withheld under mismatched Social Security numbers, sales and excise taxes paid at the register, and property taxes paid through rent or homeownership.
Why the Tax Law Reaches Everyone Who Earns Income Here
The Internal Revenue Code defines gross income as “all income from whatever source derived.” That phrase is broad enough to cover wages, tips, and self-employment earnings whether or not the person receiving them is authorized to work in the country.2Office of the Law Revision Counsel. 26 U.S. Code 61 – Gross Income Defined The IRS does not ask about immigration status on any tax form. Its role is to collect revenue on economic activity, not to enforce immigration law. Anyone earning money inside U.S. borders has a legal obligation to report it and pay tax on it.
Filing Without a Social Security Number
Most undocumented immigrants cannot get a Social Security number, so the IRS issues an Individual Taxpayer Identification Number, or ITIN, under 26 U.S.C. § 6109 for people who need to file a federal return.3Office of the Law Revision Counsel. 26 USC 6109 – Identifying Numbers An ITIN is a nine-digit number used only for tax purposes. It does not grant work authorization and does not change immigration status.
To get one, a person submits Form W-7 along with a completed federal tax return and identity documents such as a passport or a combination of a birth certificate and foreign ID.4Internal Revenue Service. Instructions for Form W-7 Once issued, the ITIN goes on the same Form 1040 that citizens and permanent residents file.5Internal Revenue Service. About Form 1040, U.S. Individual Income Tax Return
Payroll Taxes Come Out of Every Paycheck
Employees have Social Security and Medicare taxes withheld from wages under the Federal Insurance Contributions Act. The worker pays 6.2 percent for Social Security and 1.45 percent for Medicare; the employer matches those amounts, for a combined 15.3 percent on each dollar of wages.6Internal Revenue Service. Topic No. 751, Social Security and Medicare Withholding Rates Social Security tax applies to earnings up to $184,500 in 2026, and Medicare tax has no cap.7Social Security Administration. Contribution and Benefit Base
Many undocumented workers provide a Social Security number when hired, and FICA taxes are withheld from every paycheck regardless of whether the number matches the worker’s actual records. When a name and number don’t match, the Social Security Administration puts those wages into what it calls the Earnings Suspense File, a holding account for unmatched wage reports. The SSA’s Office of Inspector General has identified unauthorized work by noncitizens as the leading cause of growth in that file, which has accumulated over $1 trillion in wage reports since 1937.
Here is the part that surprises many people. Undocumented workers who pay into Social Security and Medicare through payroll deductions generally cannot collect retirement or disability benefits from those programs. Federal law requires lawful immigration status and a valid-for-work Social Security number to receive Social Security benefits. Billions of dollars in payroll taxes flow into the system each year from workers who will likely never draw on them.
Self-Employment Tax for Independent Contractors
Undocumented immigrants who work as independent contractors, whether in construction, housekeeping, landscaping, or gig work, owe self-employment tax on their net earnings. The rate is the same 15.3 percent as the combined employer-employee FICA rate, because a self-employed person pays both halves.8Internal Revenue Service. Instructions for Form 1040-C The tax is calculated on Schedule SE and reported on Form 1040.
Businesses that pay $600 or more to a contractor during the year report those payments on Form 1099-NEC. If the contractor does not provide a valid taxpayer identification number, whether an SSN or an ITIN, the business must withhold 24 percent of all payments as backup withholding and send it to the IRS.9Internal Revenue Service. Forms and Associated Taxes for Independent Contractors
Sales, Excise, and Property Taxes
Beyond federal taxes, undocumented immigrants contribute to state and local governments with every purchase. Most states impose a sales tax on retail goods, with state-level rates running from zero in the five states that don’t have one up to 7.25 percent, and combined state and local rates can be considerably higher. Retailers collect sales tax at the register from every buyer, with no identification check of any kind.
Excise taxes on gasoline, tobacco, and alcohol are built into the retail price. Every fill-up at the gas station or pack of cigarettes sold sends a portion of the price to fund transportation, public health, and other government programs. These taxes are unavoidable for anyone who buys the goods.
Property taxes fund local schools, fire departments, parks, and emergency services. Immigrants who own homes pay these taxes directly to the local tax collector based on assessed value, with no exemption or surcharge tied to citizenship. Renters contribute indirectly, because landlords build property tax costs into monthly rent. Whether a person owns or rents, living in a community means contributing to the property tax revenue that supports local services.
Which Tax Credits ITIN Filers Can and Cannot Claim
ITIN filers can claim some federal tax credits but are shut out of others, and the distinctions matter for families deciding whether filing is worth it.
A parent who files with an ITIN can claim the Child Tax Credit, but only for a child who has a valid Social Security number and is a U.S. citizen, U.S. national, or U.S. resident alien. A child listed on the return with an ITIN does not qualify.10Internal Revenue Service. Child Tax Credit Many mixed-status families use this credit for U.S.-born children.
The Earned Income Tax Credit is not available to ITIN holders. Both the filer and spouse (if filing jointly) must have valid Social Security numbers, and every qualifying child must have an SSN as well.11Internal Revenue Service. Basic Qualifications
The American Opportunity Tax Credit and Lifetime Learning Credit are available to ITIN holders treated as U.S. resident aliens for tax purposes, generally those who meet the substantial presence test. Someone who was a nonresident alien for any part of the year and did not elect to be treated as a resident alien cannot claim either education credit.12Internal Revenue Service. Education Credits: AOTC and LLC
Does the IRS Share Tax Information With Immigration Authorities
This is often the deciding question for someone weighing whether to file. Federal law places strong limits on what the IRS can share.
Under 26 U.S.C. § 6103, tax returns and taxpayer information, including a filer’s identity, income, and address, are confidential. No federal employee may disclose that information except under narrow statutory exceptions, and none of those exceptions cover immigration enforcement.13Office of the Law Revision Counsel. 26 USC 6103 – Confidentiality and Disclosure of Returns and Return Information
The penalty for violating that confidentiality is severe. Under 26 U.S.C. § 7213, any federal employee who willfully discloses tax return information without authorization commits a felony punishable by up to five years in prison, a fine of up to $5,000, and mandatory dismissal from federal employment.14Office of the Law Revision Counsel. 26 U.S. Code 7213 – Unauthorized Disclosure of Information These protections apply the same way to ITIN filers as to anyone else.
Why Filing Can Help in a Later Immigration Case
Paying taxes and keeping proof of it can matter if a person later seeks legal status. U.S. Citizenship and Immigration Services treats “compliance with tax obligations and financial responsibility” as a positive factor when evaluating whether an applicant has shown good moral character, which is required for naturalization and certain other benefits.15USCIS. Restoring a Good Moral Character Evaluation Standard for Aliens Applying for Naturalization – Policy Memorandum Failing to file or owing back taxes can count against an applicant. Keeping copies of filed returns and payment records builds a paper trail that may prove valuable years later.