How are undocumented immigrants taxed and what taxes do they pay in the U.S.?
Executive summary
Undocumented immigrants in the U.S. routinely pay the same categories of taxes as other residents — payroll (Social Security and Medicare), income, sales, property and excise taxes — often by using an IRS Individual Taxpayer Identification Number (ITIN) or through withholding from paychecks; researchers estimate they paid roughly $96.7 billion in federal, state and local taxes in 2022, including about $59.4 billion to the federal government [1] [2]. They frequently cannot claim many federal benefits tied to those taxes (for example, most are ineligible for Social Security and Medicare benefits and face limits on refundable credits) while recent IRS–DHS data‑sharing has created new fears that filing could expose them to immigration enforcement [3] [4] [5].
1. How undocumented people file and why they pay income taxes
Undocumented immigrants who lack a Social Security number can obtain an ITIN from the IRS to file federal tax returns; an ITIN is for tax processing only and does not confer work authorization or eligibility for Social Security benefits [2] [3]. Many undocumented workers also pay federal income and payroll taxes through employer withholding; some who use fraudulent or borrowed Social Security numbers still have payroll taxes withheld and thus contribute to Social Security without qualifying for benefits [2] [3].
2. Payroll taxes: paying into programs they often cannot access
Researchers estimate undocumented workers’ payroll contributions are substantial: ITEP’s accounting attributes $25.7 billion to Social Security taxes, $6.4 billion to Medicare taxes, and $1.8 billion to unemployment insurance in 2022, meaning undocumented workers help fund those programs even though they are generally barred from accessing the benefits [6] [7]. The Tax Adviser review also notes the mechanics of payroll and self‑employment taxes (12.4% Social Security, 2.9% Medicare, and additional rules for self‑employment) apply to those earning income in the U.S. [4].
3. State and local taxes: sales, property, excise and local income
At the state and local level undocumented immigrants pay sales and excise taxes on purchases, and property taxes either directly if they own homes or indirectly through rent; ITEP estimates about $15.1 billion in sales and excise taxes and $10.4 billion in property taxes paid in 2022 [1] [7]. State income and business taxes account for additional revenue — ITEP put state and local contributions at roughly $37.3 billion in 2022 [1].
4. Aggregate estimates and contested interpretations
Multiple organizations put yearly tax contributions in the tens of billions: ITEP’s 2024 analysis estimates $96.7 billion total in 2022 with $59.4 billion to the federal government [1] [8]. The American Immigration Council and other groups cite similar magnitudes — for example, the Council reports households led by undocumented immigrants paid $89.8 billion in 2023 [9] [10]. Some academic and policy outlets note different methodologies and arrive at alternative fiscal impacts [4]: while tax‑payment estimates document contributions, other studies emphasize net fiscal costs by comparing public spending on residents to taxes paid; available sources do not settle a single net fiscal conclusion [4].
5. What tax benefits are available — and what are not
Undocumented filers using ITINs can claim certain tax items, but many federal tax benefits are restricted. For example, most undocumented taxpayers are ineligible for the Earned Income Tax Credit (EITC) and are barred from Social Security retirement or Medicare benefits despite contributing payroll taxes [4] [3]. The Tax Adviser review details limits on refundable credits and nuances for self‑employment and quarterly estimated tax obligations that mirror those for other taxpayers [4].
6. Compliance, fear and the effect of policy choices
Policy and enforcement choices change behavior. The IRS historically treated ITIN filings as confidential, but a recent IRS–Department of Homeland Security data‑sharing agreement has generated fear in immigrant communities that tax filings could aid immigration enforcement; advocates and reporting indicate this could depress filing and thus reduce recorded tax receipts even if withholding from payroll remains [5] [11]. Yale’s Budget Lab models show that if undocumented people stop filing, payroll withholding from formal employers would still capture some tax flow but other contributions could fall [11].
7. What to watch next and why numbers vary
Estimates differ because researchers use varied methods — direct ITIN data, assumptions about labor force participation, and adjustments for “under‑the‑table” work. ITEP’s breakdowns and state‑level appendices are explicit about methodology and show concentration of contributions in states such as California, Texas and New York [1] [6]. When reading claims about “how much” undocumented immigrants pay or cost, examine the underlying method and which taxes or benefits are included; sources published here (ITEP, American Immigration Council, Tax Policy Center, Reuters, Tax Adviser, Yale and media reporting) present competing emphases and caveats [1] [9] [3] [2] [4] [11] [5].
Limitations: this summary relies on available reporting and analyses cited above; available sources do not exclusively resolve the question of net fiscal impact and do not provide definitive, universally agreed-upon numbers beyond the estimates cited [1] [4].