Undocumented immigrants in the United States paid roughly $96.7 billion in taxes in 2022, according to the Institute on Taxation and Economic Policy. About $59.4 billion of that went to the federal government and $37.3 billion went to state and local treasuries.1Institute on Taxation and Economic Policy. Tax Payments by Undocumented Immigrants The money moves through the same channels everyone else uses: payroll withholding from paychecks, income tax returns filed with an IRS-issued taxpayer number, sales tax collected at the register, and property taxes built into rent or paid directly by homeowners. Much of it is collected automatically, whether or not the individual ever files a return.
That $96.7 billion figure works out to roughly $8,889 per undocumented resident. It is almost certainly a floor. It cannot capture every cash transaction, every informal arrangement, or every payroll contribution that vanishes into federal accounts without being traced back to a specific worker.
Payroll Taxes: The Largest Federal Contribution
Anyone working on the books has payroll taxes pulled from every paycheck under the Federal Insurance Contributions Act. The employee share is 6.2 percent for Social Security and 1.45 percent for Medicare, and the employer matches both amounts.2Internal Revenue Service. Topic No. 751, Social Security and Medicare Withholding Rates These withholdings happen regardless of whether the name and Social Security number on the W-2 match government records.
When they don’t match, the wages get diverted into the Social Security Administration’s Earnings Suspense File, a holding account for wages the agency can’t credit to any individual’s record. The most recent government audit found the file held over $1.2 trillion in uncredited wages accumulated since 1937, a significant portion of it attributable to undocumented workers using mismatched numbers.3Social Security Administration. Status of the Social Security Administration’s Earnings Suspense File
This is a one-way street. The SSA cannot use suspended wages to calculate anyone’s retirement or disability eligibility until the wages are matched to a valid record.3Social Security Administration. Status of the Social Security Administration’s Earnings Suspense File For workers who will never have a valid Social Security number, those contributions become permanent revenue for the trust funds with no corresponding payout.
Income Tax Returns Filed With an ITIN
Filing a federal return normally requires a Social Security number, but the IRS created the Individual Taxpayer Identification Number for people who owe taxes and aren’t eligible for one. You apply by submitting Form W-7 with a completed federal return and documents proving identity and foreign status. A valid passport satisfies both requirements on its own; without one, you need at least two documents from a list of thirteen accepted forms, at least one bearing a photograph.4Internal Revenue Service. Instructions for Form W-7
The ITIN functions like a Social Security number for tax purposes only. It lets you file returns, report income, and make payments. It doesn’t authorize employment and doesn’t create eligibility for Social Security benefits. An ITIN expires if you don’t use it on a federal return for three consecutive tax years, and it has to be renewed before filing again.
Self-Employment Tax
Many undocumented workers are paid as independent contractors in construction, landscaping, cleaning, and similar trades. That means they owe both the employer and employee shares of payroll taxes themselves: a combined 15.3 percent, split between 12.4 percent for Social Security and 2.9 percent for Medicare.5Internal Revenue Service. Self-Employment Tax (Social Security and Medicare Taxes)
Self-employment tax is reported on Schedule SE and paid with the annual return, so ITIN holders who report contractor income shoulder the full 15.3 percent on top of any income tax owed. Workers paid entirely in cash who don’t file avoid the bill but also build no documented tax history.
Sales, Excise, and Fuel Taxes
Every purchase at a store or gas station generates tax revenue regardless of who’s buying. State sales tax rates run from zero in states like Oregon, Montana, and New Hampshire up to 7.25 percent, and combined state-and-local rates in some areas exceed 10 percent. The buyer’s legal status never enters the equation because the tax is collected at the register.
Federal excise taxes add another layer on specific products. Gasoline carries a federal excise tax of 18.4 cents per gallon, unchanged since 1993, plus state fuel taxes averaging about 33 cents per gallon.6U.S. Energy Information Administration. How Much Tax Do We Pay on a Gallon of Gasoline and on a Gallon of Diesel Fuel? Tobacco and alcohol carry their own excise taxes. Because these charges attach to routine consumption, they are steady and automatic.
Property Taxes Through Renting and Homeownership
Property taxes fund local schools, police, and fire services, and undocumented residents pay them two ways. Homeowners, including some who purchased using an ITIN, pay directly to their local government based on assessed value. Renters pay indirectly because landlords build property taxes into the rent. A renter never sees a property tax bill, but economists consistently treat a portion of rent as a property tax payment. In areas with high concentrations of immigrant renters, that funnel accounts for substantial local revenue that never appears in individual filing data.
Why the Effective Rate Is Often Higher Than for Citizens
Undocumented immigrants owe the same taxes as everyone else, but they’re locked out of the credits that reduce what other filers actually pay. The Earned Income Tax Credit requires a Social Security number valid for employment. An ITIN doesn’t qualify.7Internal Revenue Service. Who Qualifies for the Earned Income Tax Credit The Child Tax Credit works the same way: the filer, spouse if filing jointly, and each qualifying child must have a work-eligible Social Security number issued before the return’s due date.8Internal Revenue Service. Child Tax Credit ITIN holders with dependents can claim the smaller Credit for Other Dependents, which is worth less and isn’t refundable.
The practical result is that undocumented filers often pay a higher effective rate than citizens at the same income level. The ITEP analysis found that in 40 states, undocumented immigrants pay higher state and local tax rates than the wealthiest one percent of households in those states.1Institute on Taxation and Economic Policy. Tax Payments by Undocumented Immigrants The gap exists because consumption taxes take a larger bite out of lower incomes and because ITIN filers can’t offset their bills with the credits available to others.
Federal Benefits They Cannot Access
The other half of the fiscal picture is what these tax dollars don’t buy for the people paying them. Under the Personal Responsibility and Work Opportunity Reconciliation Act, undocumented noncitizens are ineligible for most federal benefit programs, including non-emergency Medicaid, the Supplemental Nutrition Assistance Program, Supplemental Security Income, Temporary Assistance for Needy Families, most federal housing assistance, and Federal Pell Grants.9Congress.gov. Unauthorized Immigrants’ Eligibility for Federal and State Benefits They also cannot purchase health insurance through the ACA marketplace, even at full price without subsidies.
Social Security payroll taxes flow into trust funds that won’t pay them retirement benefits. Medicare taxes fund a program that won’t cover their hospital bills. Income taxes support a government that bars them from the safety net those taxes finance.
The 2025 Shift in Taxpayer Confidentiality
One reason many undocumented immigrants have historically filed returns is the legal wall between the IRS and immigration enforcement. Federal law makes tax return information confidential, and “return information” is defined broadly to include a taxpayer’s identity, income, deductions, credits, and essentially anything the IRS collects while administering the tax code.10Office of the Law Revision Counsel. 26 U.S.C. 6103 – Confidentiality and Disclosure of Returns and Return Information
That firewall narrowed in April 2025, when a memorandum of understanding between the IRS and the Department of Homeland Security established a framework for sharing taxpayer data in criminal investigations involving individuals who have received a final removal order and failed to leave the country. The MOU is the subject of ongoing litigation and its scope may change. According to tax preparers and immigrant advocacy organizations, it has already reduced filing rates, which reduces the tax revenue collected in the first place.