Going green Homeowners are eligible for a credit worth 30 percent of the cost of adding solar panels to their houses. This home improvement isn't cheap, although the price has come down and more filers claim the credit, says Thomas Corley, president of the accounting firm Cerefice & Co.
"Let's say you invested $200,000 in solar panels," he says. "You get a credit of $60,000. You could wipe out your income taxes."
Business losses Some of those who didn't owe taxes had a partnership or business formed as an S Corporation, in which they reported the income on an individual tax return, says William Freeland, a tax economist with the Washington-based Tax Foundation. This allowed them to deduct business losses on their return.
And in 2009, when the economy was even weaker than it is now, lots of businesses suffered losses, Freeland says.
Business losses are deducted before adjusted gross income is calculated — so that means these filers still had at least $200,000 in AGI, Freeland says. But the losses still kept income low enough that other deductions and credits eliminated any tax bill, he says.
Some tax experts I spoke with are concerned that the IRS report will cause critics to pick on the rich for not paying their fair share. And they note that plenty of low- to-moderate income folks don't pay taxes, either.
According to Freeland, couples with two kids and income of up to $51,000 don't pay income taxes because of the earned income tax credit and other tax breaks.
And Corley, whose firm caters to high net-worth clients, says his first instinct was to feel sorry for the well-off who didn't owe taxes. That usually means something bad has happened, he says.
For example, a client's house burned down and the underinsured homeowner had to pay $200,000 out of pocket. Losses from property damage are deductible, and this helped erase 90 percent of the client's tax liability, Corley says.
That is a tragedy, but I'm not ready yet to feel sorry for all high earners who don't owe taxes.