If you’ve ever sat through a heated dinner table debate about immigration, you’ve probably heard the same few talking points. People talk about the border, they talk about jobs, and they definitely talk about the "drain" on public resources. But there’s a massive piece of the puzzle that usually gets skipped over entirely: the actual math on the IRS ledger.
Honestly, the reality is a bit of a head-scratcher if you only follow the headlines.
Most people assume that if you don't have legal status, you aren't paying into the system. It makes sense on paper, right? If you're "off the grid," you don't pay. Except, that’s not how the American economy actually functions. Whether it's through a grocery store receipt or a paycheck with a mismatched Social Security number, the cash is flowing toward the government.
So, how much money do illegal immigrants pay in taxes? The latest data from 2024 and 2025 suggests the number is nearing a staggering $100 billion a year.
The $96.7 Billion Reality Check
Back in July 2024, the Institute on Taxation and Economic Policy (ITEP) dropped a massive report that basically reset the conversation. They found that in 2022 alone, undocumented immigrants contributed $96.7 billion in federal, state, and local taxes.
Think about that for a second.
That’s nearly $9,000 per person. Every year.
A huge chunk of this—about $59.4 billion—goes straight to the federal government. The rest, roughly $37.3 billion, keeps state and local services running. We're talking about the money that paves roads, pays for local fire departments, and keeps the lights on in public schools.
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The wildest part? These folks are often paying a higher effective tax rate than the wealthiest 1% of Americans. In about 40 different states, undocumented households pay a larger share of their income in state and local taxes than the ultra-rich.
How Do You Pay Taxes Without a Social Security Number?
You might be wondering how the IRS even collects this money. It’s not like the government just looks the other way. There are two main ways this happens: the ITIN and "ghost" payroll contributions.
The ITIN Loophole (That the IRS Loves)
The IRS isn't the border patrol. Their only job is to collect money. Because of that, they created the Individual Taxpayer Identification Number (ITIN). It’s a nine-digit number specifically for people who aren't eligible for a Social Security number but still have a legal obligation to file taxes.
And boy, do they use it.
As of the most recent 2025 reports, there are millions of active ITIN holders. These individuals file tax returns every April, just like everyone else. They report their income, calculate what they owe, and send off a check.
The Social Security "Suspense File"
Then there’s the payroll side. Many undocumented workers use a Social Security number that doesn't belong to them or is simply made up to get a job. When the employer files the W-2, the Social Security Administration (SSA) realizes the name and number don't match.
Instead of just deleting the money, the SSA puts those tax contributions into something called the Earnings Suspense File (ESF).
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By early 2026, this "file" has grown to represent hundreds of billions of dollars in cumulative wages. Undocumented workers are paying into Social Security and Medicare with every single paycheck, but here’s the kicker: they can't claim a dime of it. They are essentially subsidizing the retirement of every legal U.S. resident while being barred from the benefits themselves.
Breaking Down the State-by-State Impact
It’s not just a federal thing. Your local economy is likely getting a boost you didn't realize. When an undocumented person buys a pair of work boots in Texas or a bag of flour in Florida, they pay sales tax. When they rent an apartment, a portion of that rent goes toward the landlord’s property taxes.
- California: They lead the pack, with undocumented residents contributing over $8.5 billion to state and local coffers annually.
- Texas: Even with its tough stance on the border, the state collected roughly $4.9 billion from this population in 2022.
- Florida: Around $1.8 billion in tax revenue comes from undocumented residents, mostly through sales and excise taxes since the state has no income tax.
- New York: Roughly $3.1 billion goes into the state's budget from these taxpayers.
Why the Numbers Are Actually Growing
You might think that stricter enforcement would lower these numbers. Kinda the opposite is happening. As the IRS digitizes more of its systems in 2025 and 2026, it's getting better at tracking "above-the-table" earnings.
Also, many immigrants want to pay.
Why? Because having a paper trail of tax compliance is often a requirement for any future pathway to legal status. If a "guest worker" program or an amnesty bill ever hits the floor of Congress, the first thing a lawyer is going to ask for is five years of tax returns.
Paying taxes is basically an insurance policy for a future that hasn't happened yet.
The Massive "What If" Scenario
There is a lot of talk about mass deportation in the current political climate. But economists at places like the Budget Lab at Yale and ITEP have started crunching the numbers on what that would actually do to the U.S. Treasury.
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It’s not pretty.
For every 1 million undocumented immigrants removed from the workforce, public services lose about $8.9 billion in tax revenue. On the flip side, if the current undocumented population were granted work authorization, their tax contributions would likely jump by **$40 billion** a year.
Why the jump? Because legal workers tend to earn higher wages and are more likely to move from "under the table" cash jobs to official payrolls where taxes are automatically withheld.
Actionable Insights for Business Owners and Residents
Understanding the scale of how much money illegal immigrants pay in taxes helps move the needle from political rhetoric to fiscal reality. If you're a business owner or a local resident, here’s what this means for your community:
- Recognize the Subsidy: A significant portion of local infrastructure is funded by people who cannot access the very programs (like Unemployment Insurance or Social Security) their taxes support.
- ITIN Compliance Matters: For those working with immigrant communities, encouraging the use of ITINs ensures that workers are protected from future legal tax liability and that the local economy remains stable.
- Economic Ripple Effects: The $100 billion in taxes is just the tip of the iceberg. This doesn't even account for the billions spent on rent, groceries, and services that keep small businesses afloat.
If you're looking to verify these numbers yourself, the IRS 2024 Data Book and the Social Security Administration's annual reports on the Earnings Suspense File are the gold standards for raw data. You'll find that regardless of where you stand on border policy, the financial contribution is a hard-coded reality of the American tax system.
To dive deeper into the local impact in your specific area, you should check the ITEP state-by-state data map, which breaks down effective tax rates for every corner of the country.