Big Paychecks, Tiny Tax Burdens: How 21,000 Wealthy Americans Avoided Paying Income Tax

The richest woman in Wisconsin, Diane Hendricks, is worth an estimated $2.8 billion, but she did not pay a dime in state income tax in 2010, the Milwaukee Journal-Sentinel first reported.

Because of a change in how her company, ABC Supply Inc., the country's largest distributor of roofing, windows and siding, is structured, Hendricks reduced her personal state income tax burden from $2.3 million in 2009 to zero in 2010, according to  records the state Department of Revenue released to the Journal-Sentinel.

While a tweak in ABC's corporate structure allowed its CEO to get out of state income taxes, a complex web of deductions and exemptions in the federal tax code have allowed more than 20,000 wealthy tax filers get off the hook on paying federal income taxes.

A recent IRS report showed that 20,752 households that reported earning more than $200,000 in 2009 paid no federal income taxes. About 1,500 of those tax-free Americans were millionaires.

So how does someone in the top 3 percent of America's income earners finagle their income tax burden down to zero? For the majority of them, it's all about donating to charity, investing in local and state governments, earning money overseas and writing off doctor bills.

The End of Serena Williams

 
 AP Images

Everyone,
Serena Williams has never lost a first-round match at a Grand Slam tournament. Not on the tricky clay of Roland Garros. Not on the skittish grass of Wimbledon. Not in sunbaked Melbourne, where half the tour is still rounding into early-season form; not in pressure-packed New York, where even the greatest competitors sometimes melt down. Serena has been many things—swimsuit pinup; fashion designer; home shopping network pitchwoman; reality show star; maybe the best (and hardest-hitting) women's tennis player of all time—but she has never, ever been a major opening match loser.