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January 09, 2018 at 07:34 AM
Now that it’s January, people’s thoughts are beginning to turn toward taxes — both the ones they get stuck paying and the ones they might be able to avoid.
(Related: IRS Advice on Property Tax Prepayment Causes Widespread Confusion)
And while it often takes a skilled accountant — and this year might need one with preternatural abilities — to figure out the best ways to cut a client’s tax bill, or at least to avoid penalties for taxes that are inevitable, Kiplinger has come up with some state taxes and exemptions that even that preternatural accountant might not have thought of. That could come in handy in light of the new tax law’s stance on state and local taxes.
Here are 10 ways Kiplinger says states can tax, or exempt, their residents:
10. South Carolina—prenuptial counseling tax break.
Yes, you read that correctly: A couple planning to marry who take “a minimum of six hours with a licensed professional or active member of the clergy (or their designee, if ‘trained and skilled in premarital preparation’)” can use that to their advantage at tax time once they’re wed, by claiming a $50 tax credit. Of course they have to file jointly.
Legislators decided to try to make marriages last longer by passing this law in 2006.
9. New Hampshire — not dirt cheap.
This is a little different from property tax; it goes after any earth that moves (not necessarily under your feet).
According to Kiplinger, the numerous quarries and gravel pits in the state have inspired lawmakers to impose an excavation tax of $.02 per cubic yard of earth excavated, which kicks in if more than 1,000 cubic yards are moved. It is aimed primarily at those who carry out industrial extraction. Lots of states tax in-the-ground assets like coal, oil and other forms of mineral wealth once it’s removed from its earthly resting place. But in New Hampshire, you can’t even give the stuff away without paying taxes on it. Offering “free fill” won’t get you out of paying for the dirt again — even though you paid for it the first time when you bought the land.
8. Montana — car registration.
If in your wildest dreams you contemplate the joys of owning a Bugatti or, say, a Lamborghini — or even making like James Bond and cruising around in an Aston Martin — you already know you’re going to pay for the privilege. But what you might not know is how much the sales tax alone will cost you if you do. (Of course, theoretically if you have the money for a million-dollar-plus car, you’ll have the multiple thousands it will cost you in sales tax.) For instance, in Connecticut, a car costing more than $50,000 is taxed, when purchased from a licensed dealer, at a rate of 7.75%. So that $1.4 million Aston Martin will set you back another $108,500.
So if that sticks in your craw, you could always go to Montana, which doesn’t have either a car tax or an inspection requirement, for that matter. In fact, what it does have is a “cottage industry” of companies that will create a limited liability company for you that is the technical owner of your car and will register it for you with the state of Montana. But bear in mind that your home state may not be as fond of this idea as you are, and it could end up costing you anyway.
7. Kansas—cheaper hard stuff.
For some unknown reason, Kansas taxes lower-alohol beer at a higher rate than it taxes beer with a higher alcohol content. While it allows regular beer, with, say, a 5% alcohol level to be sold only in a liquor store, where it’s taxed at 8% along with all the other alcoholic products, the low-alcohol stuff (a.k.a. “3.2 beer”) can also be sold at convenience and grocery stores.
There it’s taxed at whatever the regular sales tax rate is, which can be higher than the tax at the liquor store. That’s because different counties and municipalities can also charge sales tax, which gets added on to the state rate. So if you buy 3.2 beer while you’re at the grocery store, it could be taxed at as much as 10% (which is the case, for instance, in the city of Pomona). Might as well go for the good stuff.
6. California — cheaper weak stuff.
