Sources of income change by income levels, tax filing status, age and ward

The composition of income for DC taxpayers changes significantly as income, filing status, age and ward of residence changes.

Wages and salaries become a smaller part of total income as income increases.  In tax year 2011, salaries and wages made up about 80 percent of adjusted gross income (AGI) for DC taxpayers with annual reported income below $250,000. For those with AGI exceeding $500,000, wages and salaries made up less than 50 percent of their total income. Rental income averaged about 30 percent of total income for taxpayers making between $0.5 million – $5 million.  For taxpayers with AGI over $5 million, capital gains made up more than half of their total AGI, and non-wage and non-retirement income, including business income, rental income, capital gains, interest, and dividends — accounted for almost three quarters of AGI.

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Married couples and domestic partners are more likely to collect income from capital gains, business income and rents and royalties.  Wages and Salaries made more than 80 percent of AGI for single filers and 85 percent for tax filers who claimed head of household filing status.  As for married couples or domestic partners, wages and salaries accounted for only about 60 percent of reported income.

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As taxpayers grow older, wages and salaries account for less and less of their income. For taxpayers younger than 45 years old, the share of wages and salaries ranged between 81 percent and 92 percent of their 2011 total income. For taxpayers between 45 and 55 years old, wages and salaries were about 71 percent of their AGI. The percentage dropped to roughly 53 percent for taxpayers between 55 and 65, just before retirement age, and rental income, capital gains and retirement income each accounted for about 12 percent of their income. As taxpayers entered retirement, pensions, annuities, IRA distributions, and Social Security became the most important sources of income, making up about 49 percent of income for taxpayers over 75.

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Taxpayers in Wards 2 and 3, who are generally higher income earners, receive a significant amount of non-wage and non-retirement income. Taxpayers in Ward 3, for example, received 52 percent of their income from wages and salaries, while wages and salaries contributed more than 80 percent of total income for taxpayers living in Ward 1 and Wards 5 through 8. Taxpayers living east of Anacostia River, in Wards 7 and 8 had virtually no business, capital gains, interest and dividends or rental income, according to the 2011 tax returns.

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