Undocumented immigrants paid an estimated $96.7 billion in federal, state, and local taxes in 2022, according to the Institute on Taxation and Economic Policy’s most recent comprehensive analysis. Of that total, $59.4 billion went to the federal government and $37.3 billion went to state and local governments.1Institute on Taxation and Economic Policy. Tax Payments by Undocumented Immigrants The money reaches the Treasury through three channels: income tax returns filed using a special IRS identification number, payroll taxes withheld from paychecks, and the sales, excise, and property taxes built into daily purchases and rent.
How the $96.7 Billion Breaks Down
Federal income taxes make up a large share. About 3.8 million tax returns filed in 2022 used an Individual Taxpayer Identification Number, reporting roughly $14.4 billion in taxable income. The ITIN exists because federal tax law does not turn on immigration status. Under 26 U.S.C. ยง 6012, every individual with gross income above the filing threshold must file a return.2Office of the Law Revision Counsel. 26 USC 6012 – Persons Required to Make Returns of Income3eCFR. 26 CFR 301.6109-1 – Identifying Numbers4Internal Revenue Service. How to Apply for an ITIN
Payroll taxes are the second channel. Undocumented workers on a formal payroll have Social Security and Medicare withheld from every check at the standard combined rate of 15.3%, half from the worker and half matched by the employer.5Internal Revenue Service. Topic No. 751, Social Security and Medicare Withholding Rates Employers are required by law to collect these taxes as wages are paid.6Office of the Law Revision Counsel. 26 USC Ch. 21 – Federal Insurance Contributions Act Because undocumented workers made up roughly 4.8% of the U.S. workforce in 2022, those withheld amounts run into the tens of billions annually.7Pew Research Center. What We Know About Unauthorized Immigrants Living in the U.S.
Consumption and property taxes account for the rest. ITEP estimates that about $15.1 billion of the state and local total came through sales and excise taxes alone, with the remainder from income and property-related taxes.1Institute on Taxation and Economic Policy. Tax Payments by Undocumented Immigrants Sales tax gets paid at every register that charges one. Federal excise taxes of 18.4 cents per gallon on gasoline and 24.4 cents on diesel, along with excise taxes on tobacco, alcohol, and airline tickets, are built into retail prices and collected regardless of who pays.8Tax Policy Center. What Are the Major Federal Excise Taxes, and How Much Money Do They Raise? Property taxes reach renters indirectly, since landlords pay the tax on rental buildings and pass the cost through in rent.
Why Their Effective Tax Rate Runs High
The headline figure only tells part of the story. Undocumented immigrants pay an average effective state and local tax rate of 8.9% nationwide, compared with 7.2% for the top 1% of earners. In 40 states, they pay a higher rate than the wealthiest 1% of households in the same state.1Institute on Taxation and Economic Policy. Tax Payments by Undocumented Immigrants
Two big federal credits explain much of the gap. The Earned Income Tax Credit, which can be worth thousands of dollars for low-income workers, requires every person on the return, including filer, spouse, and any qualifying children, to have a valid Social Security number. One ITIN on the return knocks out the whole credit.9Internal Revenue Service. Basic Qualifications The Child Tax Credit works the same way: each qualifying child must have a Social Security number valid for employment, issued before the return’s due date, so children with ITINs do not count.10Internal Revenue Service. Child Tax Credit A smaller Credit for Other Dependents, worth up to $500, is available and does allow ITIN holders, but it is a fraction of the full Child Tax Credit other families receive.
A handful of states have extended their own state-level EITCs to ITIN filers. The federal credit remains off-limits.
Payroll Taxes They Cannot Recover
A significant portion of what undocumented workers pay funds programs they are barred from using. Federal law requires anyone receiving Social Security retirement or disability payments to be lawfully present in the United States, and the Social Security Protection Act of 2004 further bars workers who never obtain work authorization from using their covered earnings to qualify for benefits.11Congress.gov. Social Security Benefits for Noncitizens Supplemental Security Income carries similar restrictions.12Social Security Administration. Supplemental Security Income Eligibility Requirements
When an employer submits a W-2 with a name and number that do not match, the Social Security Administration cannot credit the earnings to anyone’s account and routes them to the Earnings Suspense File.13Social Security Administration. 20 CFR 422.120 – Earnings Reported Without a Social Security Number or With an Incorrect Employee Name or Social Security Number By 2014, that file held more than $1.2 trillion in uncredited wages, and the balance has continued to grow.14Social Security Administration Office of the Inspector General. Status of the Social Security Administration’s Earnings Suspense File The practical effect is a transfer from undocumented workers to current and future retirees who are eligible to collect.
What Could Move the Number
Two things could change the totals going forward. The first is work authorization. ITEP projects the figures would rise substantially if undocumented workers received formal work authorization, because higher reported wages and fewer cash-only jobs would broaden the taxable base.1Institute on Taxation and Economic Policy. Tax Payments by Undocumented Immigrants
The second is compliance. For decades, Section 6103 of the Internal Revenue Code kept tax return information confidential as a general rule, with no federal or state employee permitted to disclose return information obtained in the course of official duties.15Office of the Law Revision Counsel. 26 U.S. Code 6103 – Confidentiality and Disclosure of Returns and Return Information That firewall gave ITIN filers reason to keep filing. On April 7, 2025, the IRS signed a memorandum of understanding with Immigration and Customs Enforcement allowing ICE to request taxpayer names, addresses, and tax data for individuals facing final deportation orders or under federal criminal investigation, relying on Section 6103(i)(2), which allows limited disclosure of taxpayer identity information for criminal investigations.16Congress.gov. IRS-ICE Data-Sharing Agreement Legal Analysis
A federal district court in Washington, D.C. declined to block the sharing in May 2025. In November 2025, a federal judge blocked the IRS from continuing to share records with ICE, finding the agreement likely unlawful. That ruling is on appeal and the situation is unsettled. If compliance drops in response, the annual tax total drops with it.
The Bottom Line
Undocumented immigrants pay roughly $96.7 billion a year in combined federal, state, and local taxes, at effective state and local rates higher than the top 1% of earners in most states. They pay full payroll taxes into Social Security and Medicare, are excluded from the federal Earned Income Tax Credit and Child Tax Credit, and cannot collect Social Security retirement benefits on their covered earnings unless they obtain work authorization. The consumption and property taxes they pay require no filing at all and reach state and local treasuries through ordinary purchases and rent.