More than half of American households didn't pay any federal income tax last year

• About 107 million households owed zero federal income taxes in 2020, per the Tax Policy Center.
• That's about 40% higher than the number of American households who didn't have to pay in 2019.
• Senior fellow Howard Gleckman wrote that this is "eye-popping" but "keep in mind: It was only temporary."

Around 31 million more households didn't have to pay federal income taxes in 2020 than in 2019. That's a 40% increase, according to new data from the Urban-Brookings Tax Policy Center.

According to data from the think tank, 106.8 million households owed no federal income taxes in 2020, or 61% of households who paid taxes. In 2019, this number was 75.9 million households, or about 44% of taxpaying households. Job losses and pandemic-era financial aid are the sources of this savings, so researchers say it's likely just a one-year spike.

"The number of households who paid no income tax last year truly was eye-popping," Howard Gleckman, a senior fellow at the Tax Policy Center, wrote in a post on the think tank's website. "But keep in mind: It was only temporary."

Federal pandemic aid saved Americans money on their tax bills

Gleckman notes in his post that this temporary spike was due to things like stimulus checks and massive job losses seen in 2020 during the pandemic, where "many were low-wage workers who were paying very little income tax before the pandemic hit."

Overall, the US lost over 22 million jobs in March and April in 2020. Specifically leisure and hospitality, one of the industries hardest hit by the pandemic and which includes typically lower-paying jobs like in restaurants and hotels, lost around 8 million jobs during March and April in 2020. The leisure and hospitality industry continues to see consecutive employment gains, but some former workers don't plan on returning to the industry. The industry has increased wages, and many employers have introduced signing bonuses or other creative ways to help with hiring woes seen right now.

These increased wages for workers, not just those in leisure and hospitality, may mean more will owe federal income taxes again next year. Gleckman wrote that "many low-wage workers are getting raises, which will return them to the federal income tax rolls."

Gleckman added that stimulus checks and expanded tax credits, such as the temporary expanded child tax credits, also contributed to more people not owing federal income taxes.

"Because [stimulus checks] were designed as refundable tax credits, they had the effect of significantly reducing tax liability in both 2020 and 2021. And the payments flipped some households from paying income tax to not doing so," Gleckman wrote in the post. There were three rounds of stimulus checks, with the third round in 2021 being the largest.

The spike in households not paying federal income taxes won't last

Gleckman wrote that the think tank estimates the number of households owing no federal income taxes will return to pre-pandemic levels in 2022 to about 75 million. In 2021, this figure is estimated to drop slightly from 107 million US households to about 102 million, still higher than the number of households not paying in 2019.

Although the number is expected to drop in 2021, many will still not pay. Almost all lower-income households making less than $28,000 will not have to pay and 43.2% of middle-income households will not have to pay.

Although stimulus checks and tax credits provided relief to many US households and contributed to many Americans not owing income taxes, a fourth stimulus check isn't likely right now and the child tax credit was only temporarily expanded for a year. However, President Joe Biden does want to continue the expanded child tax credit through 2025 as part of the American Families Plan.