Tax season has come around, and many of us have begun the thrilling task of gathering year-end statements from banks and brokerages. Opinions are often divided over which taxes and tax rates are reasonable, but there are some state tax laws that most people would view as weird – or at least surprising. Some can offer lessons for us all, too.
Here are seven weird state tax laws that should at least have you raising your eyebrows:
Alabama: A Confederate veterans tax
The last veteran of World War I, which ended in 1918, died back in 2011, but in Alabama, taxpayers are still paying a Confederate veterans tax – tied to the Civil War. The war ended in 1865, and its last surviving veterans died decades ago.
What’s going on, then? Well, this tax is a reminder of how persistent taxes can be. Once a tax is set in place and its revenue is expected and planned for, many won’t want it to be curtailed. This tax used to support needy veterans at the Alabama Confederate Soldiers’ Home (which closed nearly 80 years ago) and is now used to maintain the Confederate Memorial Park in the town of Mountain Creek. With the tax reportedly generating around $400,000 annually, the park is one of the best maintained in the state.
New Hampshire: No income tax and no sales tax
Most states in the U.S. levy an income tax and a sales tax. Some sales taxes are very low, if income taxes or other taxes are relatively high – and vice versa. New Hampshire thus seems an oddity for charging neither. So what gives? Well, it does tax interest and dividends to a modest degree. More importantly, it charges hefty property taxes – recently the third highest in the nation. That’s a good reminder that towns and states unavoidably require lots of dollars to run their governments and towns and that the money has to come from somewhere. If you’re attracted to a certain state because of low property taxes or low sales taxes or low-income taxes, dig deeper to see how it’s generating its income.
Missouri: A bachelor tax
If you’re an unmarried man between 21 and 50 in Missouri, get ready to bear a higher tax burden than your married neighbor. Missouri taxes such guys $1 per year – costing some long-term Show-Me-State-dwellers about $30, in total. The law dates all the way back to 1820, when the value of that dollar was equal to about $20 today. Similar taxes have existed in many countries and times, often for the purpose of encouraging marriage.
South Carolina: A tax deduction for charity meat
You’re probably aware that tax deductions are available for qualified donations you make to charities. Writing a check to a tax-exempt non-profit, for example, can shrink your tax bill, as can donating a pile of used clothing to Goodwill (as long as you have a receipt and claim fair market values for the items). It doesn’t end there, though. In South Carolina, licensed meat processors can enjoy a $50 tax deduction if they process a deer carcass and donate it to charity. That’s $50 per carcass if the tax law’s rules are followed. This is a good reminder of the value of tax deductions. If you were able to process and donate 20 carcasses and deducted $1,000, you’d avoid paying $250 if you were in the 25% tax bracket.
South Carolina: A pre-marriage counseling tax credit
Tax credits are even better than tax deductions. There are big ones and small ones and each one can reduce your tax bill on a dollar-for-dollar basis. In South Carolina, one of the odder tax credits available is for $50 if a couple getting married goes through at least six hours of qualified pre-marital counseling before doing so and then files a joint tax return. It’s well worth looking into what credits you may be eligible to take. The Lifetime Learning Credit, for example, is worth up to $2,000 per eligible student and might lop off a whopping $2,000 from your taxes.
Hawaii: The ‘exceptional tree’ deduction
The state of Hawaii is known for its great natural beauty and a little detail in its tax code reflects this: A deduction of up to $3,000 for qualified expenses incurred maintaining an “exceptional tree.” What, exactly, is an “exceptional tree”? It’s “a tree or stand or grove of trees with historic or cultural value, or which by reason of its age, rarity, location, size, aesthetic quality, or endemic status has been designated by the county committee as worthy of preservation.”
New Mexico: A centenarian reprieve
Living a very long time offers many benefits, such as the opportunity to see history unfold much more than you expected to and, perhaps, the chance to see your great-grandchildren grow up. If you live in New Mexico, there’s one more benefit to look forward to: The exemption from having to pay state income tax once you hit the big 1-0-0. That tax break isn’t likely to benefit too many people, but it’s worth noting that the number of centenarians in America has been rising over time – with some meaningful consequences. For example, living a life that’s above-average in length can require a retirement nest egg that’s above-average in size. You don’t want to run out of money too soon, after all. You can prepare yourself for the possibility of living a very long time by buying a deferred fixed annuity that will start paying a fixed sum once you reach a certain agreed-upon age. You might also consider some savvy Social Security strategies, such as delaying when you start collecting or coordinating with your spouse.
The weird tax laws above are just a few of many that exist. Take some time to look up more, if you’re so inclined. Or, spend that time looking into tax deductions and credits you might qualify for.
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