Stretching Your Dollar: How to Navigate Tax-Free Holidays

<div class="block">Who doesn&#39;t love a good tax-free bargain? In this Stretching Your Dollar segment, we&#39;re providing some useful tips on navigating tax-free holidays. Nick Wolny, senior editor at CNET Money, joined Cheddar News to break down the purpose of these holidays and how to stay on budget and avoid impulse buying.</div>

Stretching Your Dollar

Today, we're spotlighting the tax free holidays happening across the country in some states, tax free holidays, promise a temporary relief from sales tax on certain items, giving customers another way to save on essentials. Well, joining me now is Nick, senior editor with see that money on the overall value of tax free holidays. And Nick, let's just start by talking about what a tax free holiday does. What's the purpose, main purpose of a sales tax holiday is to give consumers relief. So in a typical state, if the state enforces a sales tax holiday or a tax free weekend of some kind, the state department of Revenue has said they will not collect sales tax on certain categories of items in an effort to decompress consumers when they're spending large amounts of money for certain things, certain essentials. Now back to school is usually the most popular tax free holiday. But in recent years, we've also seen some states establish tax free holidays for things like disaster preparedness in states like Florida and Texas. For example, to prepare for the hurricane season, there will be a tax free weekend for something like a generator or other emergency supplies. So, while it's not always about back to school supplies, a tax free weekend is usually related to back to school in some way we've been doing back to school tax free weekends for over 20 years now. So, it's by far the most popular. How do these differ across states? And are you finding that some states have better deals than others? Some states absolutely have better deals than other than others. It really just comes down to state by state. What legislation has been passed when the weekend is and what the stipulations are. The biggest thing to remember with the tax free we can or a tax free holiday is that there's gonna be certain categories of items where the sales tax is waived and there is usually a cap of some kind. There is a maximum, for example, for clothing, usually the per item maximum that will be eligible for no sales tax is going to be around $75 or $100 per item. So you're probably not going to go and get, you know, that winter park for you for yourself as an adult. But it's really intended to be more about getting Children or getting young adults set up for the school year and purchasing those essentials for them. How much on average do you think a family can save during some of these tax free holidays? Well, what we know from some reporting from stat earlier this year is that the average household is expected to spend around $900. That's a record. It's a slight lift from last year and it's a lift of over 25% since 2019. Uh, and so based on that, if you had all of those expenditures be eligible for tax free weekend, let's say the state had something like 8% 8.2 0.5% sales tax, whatever you see on your receipt, then that's the amount that you're gonna save. So for $900 that would come out to about 70 75 bucks in savings. So for some families, it really does add up and it's a substantial discount. Ok. Best tips on how to make sure that you don't overspend or impulse buy, uh, during these periods. It's very, very tempting. I think going in with a plan is a huge piece of the puzzle. Also. Think about this per item limit rather than focusing on. What is that big fancy purchase that I want to potentially get during tax free weekend or during the tax free holiday. Perhaps there's something that you want to stock up on, you could stop up, stock up on socks, you could stock up on certain clothing. You can certainly stock up on school supplies. Right. It's likely that you'll need notebooks and folders, pens and pencils all year round for the school year. So those would be some great items to focus on. I think the big thing is just going in with a plan. It's going to be a very exciting time, especially if you're shopping in person. And so it can be easy to go off the rails. Stay focused on what you actually need to purchase. What are the essentials get in and get out and purchase those items? How do tax free holiday savings compare to some other major events for budgeting purposes, let's say a Black Friday or even a Cyber Monday. Well, I think the biggest difference is that this is specifically a sales tax holiday. So it won't apply to every state. Um And it will also just really depend on the amount of sales tax that that state typically charges. Also, it's important to remember that the item itself is not necessarily being discounted. So some retailers might end up adding some discounts, might try to offer you some bundles or some special deals, things like that. But generally the discount is not on the product itself. It's more on the tax. So you probably won't see as robust of shopping deals as you would normally see, especially if you're going to shop online. If you're shopping with online retailers, you know, the Amazons, the Walmarts, the best buys. This is a state specific holiday. Some people are getting discounts and some are not. So you probably won't see as much marketing. It won't be as flashy. You still will get that tax discount though. Ok, so I do want to just finish on that point because you mentioned if you're shopping online in certain states, uh, you could actually benefit from those online purchases. But is it true that in other states you wouldn't be able to actually benefit in the same way? That's right, the way it works with online shopping. Uh, if you're gonna say you're gonna shop on Amazon, is that the shipping address of the item is what takes the sales tax? And that's true year round as well. So if you live in a state that has a tax free weekend and you are shopping online for some of the bigger retailers that sales tax discount or that waive sales tax is going to already be applied, which is fantastic. You'll get some savings and you won't have to even leave your house uh with, for some smaller retailers, they may not have that automatically set up to give you that discount during the weekend. But know that if you are accidentally charged sales tax on eligible items, you can either contact the seller to potentially get a refund on that sales tax or they can end up giving you a form that you can send to your state Comptroller's office and you can get that sales tax refunded that way as well. So you can definitely online shop, uh, if you're in an eligible state and save some bucks longer. All right, Nick, thank you so much. Great tips. Heading back to school.