No, the IRS is not shutting down their operations — there is still (and probably ever will be) a federal income tax.
But states are a different story…
This being travel season, and the season during which some of our clients turn their eyes towards making a move, I thought I’d give you some info on how state and local taxes might affect your decisions.
Oh, but back to federal taxes (and state) — consider this your quick reminder that estimated taxes for the second quarter are due June 15th.
This one always feels as if it came a little quick (two months since last payment instead of the normal three), so if this applies to you, you’ll want to make sure you have that all set up in time.
Secondly (and relatedly), I think I’m still in denial that we’re already into June. Our busiest season is behind us, and I always seem to expect that everything will slow down in a massive way afterwards … but this year has seen so much energy and growth around our company that I still find myself in the midst of some very full days.
This, of course, is a very good thing. We are so grateful to be able to play such a meaningful role in the lives of our clients. We continue to work with some clients who are on extension and we’re helping clients who are already making changes to their financial lives in order to proactively save on taxes. It’s all fun, because we really do love what we do around here.
So, speaking of proactive planning, if you’re considering travel or a move, keep this stuff in mind…
“Real World” Personal Strategy Note
Our States, Their Sales and Your SALT
“Individual commitment to a group effort – that is what makes a team work, a company work, a society work, a civilization work.” -Vince Lombardi
WARNING: What I’m about to share might make you “salty”.
The topic is state and local taxes (SALT), and if there’s any condolence … it’s that nobody is exempt from paying their part.
But where exactly do your SALT dollars go?
With the Tax Cuts and Jobs Act (TCJA), answering that question got a little trickier this year. In short, SALT includes income taxes from taxing jurisdictions as well as real estate and personal property taxes. Where the TCJA altered things was its limiting of the amount which is potentially deductible from federal tax returns.
Let’s take a look at some more SALT ramifications:
Higher Price to Purchase
Paying sales tax has become so woven into our economic fabric that we hardly recognize it on a day-to-day basis.
But states depend heavily on sales tax to make it through the year (see list below of which states truly rely on sales tax). The revenue generated plays a significant role in the maintenance of cities, counties, schools and other initiatives within the state.
Do you like the state you live in? I hope so. Most every purchase you make goes toward its cause(s).
The Few and the Proud
HOWEVER, if you live in one of the five states that doesn’t apply a statewide sales tax — Alaska, New Hampshire, Montana, Delaware, Oregon — there are some other laws that apply to you.
In Montana, tourist-heavy populations can add up to 3% sales tax on their goods sold. Delaware (yes Delaware) is often called a “tax shelter” because of its individual tax laws, but businesses do pay more via gross receipts tax. New Hampshire will add a 9% sales tax to hotel rooms, rental cars and restaurant meals, but is otherwise (mostly) sales tax-free so that you can “Live Free or Die”. Neither Alaska nor Oregon collect sales tax either, but all is subject to change through the vote.
Top Ten Taxed for Sales
The list below is the percentage, in state revenue, comprised of total sales tax collections by state. Although Washington doesn’t collect corporate or individual income tax, they lead this sales tax charge with 46.4% of state revenue coming from sales tax.
Also, note the more “touristy” locations — Vegas, Mardi Gras, Nashville, Maui — embedded into this list. Going on vacation to any of these locations soon? Be on the lookout for extra pennies (and dollars) to pay.
- Washington 46.4 percent
- Tennessee 41.5 percent
- Louisiana 41 percent
- South Dakota 39.6 percent
- Nevada 39.4 percent
- Arizona 38.7 percent
- New Mexico 37.8 percent
- Arkansas 37.5 percent
- Hawaii 37.2 percent
- Texas 35.4 percent
It’s a Catch 22, right? Do you want to pay extra for a better place to live, or pay less for the things only you need?
And if you’d like to schedule a meeting, please give our office a call.