Federal taxes impose burdens that extend far beyond the amount taxpayers ultimately owe each April. Complying with the tax code requires substantial time spent understanding complex rules, gathering documentation, and completing forms, as well as out-of-pocket expenses for tax preparation services, software, and related compliance costs.
Each year, NTUF’s annual Tax Complexity study quantifies these burdens by tracking both the time and out-of-pocket costs taxpayers incur to comply with the federal tax code. Last year, for the 2025 filing season (tax year 2024), we found that Americans spent 7.1 billion hours worth $464 billion, or 13 hours per taxpayer, complying with federal taxes.
This research updates for the current 2026 filing season (tax year 2025) one familiar and widely used part of that broader analysis: individual income taxes filed using Form 1040 and its associated schedules.
There is some good news heading into the upcoming tax filing season. According to the latest Internal Revenue Service (IRS) estimates, aggregate individual income tax compliance hours are projected to fall from 2.129 billion hours in tax year 2024 to 1.948 billion hours in the current filing season for tax year 2025—freeing up roughly 181 million hours.
For taxpayers, this translates into a meaningful reduction in opportunity costs, which NTUF values by applying average private-sector labor costs ($45.65 per hour, as of June 2025) to the time spent on tax compliance—a savings worth $6.17 billion.
Findings
Table 1 summarizes recent trends in individual income tax compliance burdens and highlights several notable changes heading into the current tax filing season for income earned in 2025. After several consecutive years of rising compliance hours, the IRS now projects a meaningful decline in total time burdens for individual income tax filers, driven primarily by updated burden modeling and changes in filing behavior tracked in IRS surveys. At the same time, out-of-pocket compliance costs continue to rise, reflecting higher expenses associated with paid preparers, tax software, and navigating new or revised tax provisions.
Table 1. Individual Income Tax Compliance Burden, 2017–2025 (in Billions) | ||||
| Total Hourly Compliance Burden | Opportunity Cost of the Time Burden | Out-of- Pocket Cost | Net Tax Compliance Burden |
2017 | 1.855 | $62.55 | $31.72 | $94.27 |
2018 | 1.784 | $60.75 | $31.76 | $92.51 |
2019 | 1.717 | $59.61 | $33.27 | $92.88 |
2020 | 1.995 | $72.28 | $37.96 | $110.24 |
2021 | 2.048 | $77.97 | $39.75 | $117.72 |
2022 | 2.211 | $87.58 | $42.97 | $130.55 |
2023 | 2.249 | $96.95 | $45.37 | $142.32 |
2024 | 2.129 | $95.10 | $48.68 | $143.79 |
2025 | 1.948 | $88.93 | $49.76 | $138.69 |
Reasons for the Change
Most of the year-over-year change in individual income tax compliance burdens are due to technical adjustments in the methods the IRS uses to track this information. The IRS updates its Taxpayer Burden Model for Individual Taxpayers annually to reflect new information on taxpayer behavior, form usage, and compliance patterns. This year’s model was revised using survey data from Tax Year 2023 filers, resulting in an estimated 113 million–hour reduction in compliance time.
Additional technical adjustments including updated population counts, macroeconomic assumptions, and revised tax return data account for a further 102 million hour reduction in estimated compliance burdens. Taken together, these methodological updates explain the bulk of the projected time savings for individual income tax compliance hours.
There were also some policy changes that offset a portion of the overall reduction in compliance time. Taxpayers seeking to take advantage of new credits enacted under the One Big Beautiful Bill Act (also known as the Working Families Tax Cut) may face additional complexity and spend more time understanding and claiming these tax benefits including, limits on deductions for state and local taxes, new exclusions for tips, overtime pay, car loan interest, as well as the extension and enhancement of the Child Tax Credit. The IRS estimates that these provisions will generate nearly 26 million additional compliance hours.
In addition, new digital asset reporting requirements are projected to add more than 6 million compliance hours, reflecting the continued expansion of tax reporting obligations in emerging areas of the economy. These changes also contributed to the net rise in out-of-pocket expenses reflected in the table above.
How Compliance Burdens Differ Across Taxpayers
The experience of different taxpayers can vary greatly from the average time burden calculated by the IRS. Individuals have much lower average time burdens than pass-through businesses that use the 1040 Form to file individual income taxes. On average, all 1040 filers faced a time burden of 12 hours, with average out-of-pocket costs of $290.
Table 2. Compliance Burden of the 1040 Form: 2024 vs. 2025 | ||||||
| Filing for Tax Year 2024 | Filing for Tax Year 2025 | ||||
% of Returns | Average Time Burden | Out-of-Pocket Cost | % of Returns | Average Time Burden | Out-of-Pocket Cost | |
Non-business | 71 | 8 | $160 | 71 | 8 | $160 |
Business | 29 | 24 | $620 | 29 | 21 | $610 |
Average for All 1040 Tax Filers | 100 | 13 | $290 | 100 | 12 | $290 |
Source: 1040 Instruction Form 2024 & 2025. | ||||||
Furthermore, the IRS data show that compliance burdens rise sharply as income increases. For taxpayers earning under $25,000, the IRS estimates an average time burden of about 11 hours and $125 in out-of-pocket costs. By contrast, taxpayers with incomes between $150,000 and $175,000 face average out-of-pocket costs exceeding $400, while those earning $250,000 to $275,000 incur average compliance costs of more than $700 and spend nearly 15 hours on tax compliance.
At the top of the income scale examined, filers earning $475,000 to $500,000 spend over 22 hours on average and more than $1,400 on out-of-pocket costs. These figures underscore how higher incomes with more complex tax situations lead to substantially higher time and financial burdens.
Conclusion
The latest IRS burden estimates point to a modest but welcome reduction in the total time taxpayers will spend complying with the individual income tax. Importantly, however, this decline is driven primarily by technical updates to IRS burden modeling. At the same time, out-of-pocket compliance costs continue to rise, and recent policy changes have introduced new layers of complexity for certain taxpayers seeking to claim expanded credits or exclusions, or navigate new reporting requirements. Some of these increases should smooth out over time as taxpayers, tax preparers, and the IRS gain experience with the new provisions. Policymakers could also consider simplification options, such as a less-complicated version of no tax on tips.
As Congress debates the future of tax policy, meaningful simplification should remain a priority to ensure that reductions in measured time burdens translate into real and lasting relief for taxpayers.