Paying taxes may be a fact of life, but depending on where you live, you may be able to keep a little extra money in your pocket thanks to some state-specific tax breaks. From socking away money in a college savings fund to donating to a charitable cause, there are plenty of ways to save money with available tax credits and deductions -- if you qualify. While heading into tax season, shoebox of receipts in hand, keep in mind these money-saving tax tips from each state.
(Be sure to consult a tax adviser to confirm benefits that might be available based on your state or individual status.)
Families and individuals saving for college can benefit at tax time thanks to the CollegeCounts 529 Fund, a plan that offers tax deferral for savings within the account as well as tax-free withdrawals for certain college expenses. The fund can help meet college costs nationwide, even if you don't live in the state. While most states offer 529 plans, Alabama taxpayers have it good: They are eligible for a state income tax deduction up to $5,000 for individuals and $10,000 for couples filing jointly when both contribute.
Alaska is one of a handful of states that doesn't withhold personal income tax -- the others are Florida, Nevada, South Dakota, Texas, Washington, and Wyoming -- which helps save a bundle. The state also exempts from property taxes the first $150,000 of assessed value for disabled veterans and seniors 65 and older. And if you happen to be a whaling captain recognized by the Alaska Eskimo Whaling Commission, you can deduct up to $10,000 for whaling-related expenses.
Taxpayers who itemize deductions can take advantage of several state-specific tax credits while getting a federal deduction for the same charitable deductions. The credits include donating to the state private school system and the public school system (up to $200 for individuals and $400 for family) even if you don't have a student enrolled. Taxpayers can also donate to a qualifying state foster care charitable organization, the Arizona State Department of Veteran Services, and organizations that help the working poor. Other items that may be deductible include license plate fees and medical expenses.
Individuals and businesses that own historic properties in Arkansas can make the most of a recent law passed that increases the state tax credit on certified rehabilitation projects. While it may not apply to many, if you own a property listed on the National Register of Historic Places or contribute to National Register historic districts, you can claim a tax credit on 25 percent of the first $1.6 million of eligible expenses -- more than triple the amount before the new law.
If you rent your home and have personal income tax liability, you may be eligible for the state's renters credit, which applies if your adjusted gross income is $40,078 or less as an individual or $80,156 or less if married (or are registered domestic partners) and filing jointly. The credit isn't huge -- $60 for individuals and $120 for couples -- but, hey, everything counts at tax time. Certain income is also exempt from income taxes, including Social Security, state tax refunds, unemployment compensation, and state lottery winnings (fingers crossed).
Low-income, elderly and disabled taxpayers may be eligible for a rebate on property tax and heating costs, including those paid as part of rent payments or directly. Known as the Property Tax/Rent/Heat Credit rebate, or "PTC" rebate, the total amount is determined by income and expenses.
Seniors are eligible for a variety of advantages when it comes time to file taxes. Anyone 55 or older who sells their home and takes a one-time federal exclusion on the sale will not have to pay the first $125,000 of the capital gain. If the seller is 65 or older and lived in the home five of the past eight years, the capital gain is not taxed at all. Additionally, the state also offers an annual rent or property tax credit to residents 65 or older, as well as free aid with personal taxes.
For such a small state, Delaware offers taxpayers huge benefits in tax season. In addition to having the fourth-lowest U.S. property tax, it also has low income tax rates, does not tax Social Security income and has no estate or inheritance tax -- all of which make a hugely popular destination for retirees. Retirees should also take advantage of a pension exclusion, that offers a deduction up to $15,000 on income from pensions or retirement savings accounts for residents 60 and older.
Sunshine and beautiful beaches aren't the only reason snowbirds descend every winter. Establish residency by crossing the 183-day mark and become eligible to enjoy no income tax, zero taxes on Social Security and retirement earnings, certain investment earnings, and generally lower taxes. Consult a tax professional before moving, though. There are may be other requirements.
Another popular state for retirees, the Peach State offers a number of money-saving opportunities. Georgia does not tax Social Security retirement benefits, and there's no estate or state inheritance tax. Additionally, individuals 65 and older can deduct up to $65,000 (it's $130,00 if married) on retirement income. Taxpayers who are 62 and older, or permanently and totally disabled, also may be exempt from tax on most types of retirement income up to $35,000.
While most of us just daydream about a trip to Hawaii, those lucky enough to live there can save money at tax time if they help care for the island's lush landscape. Taxpayers may deduct up to $3,000 for each tree on their property deemed "exceptional" by a certified arborist who establishes the tree worthy of preservation based on rarity, age, location, size or aesthetics. The deduction goes toward maintaining the tree, but can be taken only once every three consecutive tax years.
Cheapest Time to Visit Hawaii
When: September Why: Flights are cheapest
You can't go wrong visiting Hawaii at any time of year, but the costs of a Hawaiian vacation do add up. Fortunately, you can catch a break: September is the cheapest time to fly to Hawaii, with an average round-trip cost of $605.
Along with visiting the beach and hiking to volcanic views, you can catch the Aloha Festivals during September. As a bonus, crowds disappear when the kids are back in school. The average price for a hotel is $209 per night, according to tourism website Go Visit Hawaii. Other cheap months for Hawaiian fun include April, May and October.
To help offset sales tax and help families buy groceries, Idaho introduced a grocery credit in 1965. The grocery credit goes up to $100 per person, based on income, and can go toward stocking up on Idaho spuds or anything else on the grocery list. Taxpayers who don't wish to get the credit can donate it to the Cooperative Welfare Fund, a state trust fund for public assistance.
Cheapest Time to Visit Idaho
When: September Why: Off-season
Like other states known for their summer and winter sports, Idaho is an affordable destination for fall travel. September is the cheapest month to fly to Idaho, with an average round-trip flight costing $413.
Sure, you won't be skiing, but you can still do some biking and whitewater rafting. Silverwood Theme Park is open on September weekends, if the family is looking for last-minute thrills. Or head to Twin Falls to see Shoshone Falls, a stunning, 212-foot beauty on the Snake River.
Another retiree-friendly state, Illinois offers full deductions for pension income, Social Security, and retirement savings account income. Taxpayers with children in kindergarten to 12th grade at a public or private school may also qualify for a tax credit for a portion of expenses. Low- and some middle-income families and individuals may also qualify for the state's Earned Income Tax Credit, which can equal 10 percent of their federal EIC.
Small-business owners may be able to claim numerous business-related expenses as deductions or write-offs, but must file additional schedules. One of the most common is the Schedule C Business Deductions, which includes things such as promotional materials, office supplies, and home office deductions. They can also claim adjustments to gross or total income on federal taxes, including half of the self-employment taxes paid, retirement accounts, and health plans.
Taxpayers with children attending kindergarten to 12th grade in state can save at tax time with a Tuition and Textbook Credit. Parents can get credit for 25 percent of what's spent on instructional books and tuition for up to $1,000 for each dependent. The credit also applies to some other school-related supplies, such as musical instruments and costumes for plays. Be sure to keep good records.
Social Security income is exempt for retirees with an Adjusted Gross Income below $75,000, and public pension income. (Other forms of retirement income, such as a 401(k) or IRA, are not.) To help lower-income seniors, the state offers tax relief programs such as the homestead refund for individuals born before Jan. 1, 1962, with a total household income of $34,450 or less. The Safe Seniors program also refunds 75 percent of paid property taxes for those over 65 with a household income of $19,500 or less.
Photo credit: Getty
Most Expensive Zip Code in Kansas: 66224
Zillow Median Home Value: $457,200
Leawood lies south of Kansas City. Zip code 66224, in particular, covers the southern tip of Leawood. A relatively small town with a population of approximately 34,579, according to 2015 figures from the Census Bureau, the median household income in Leawood is an impressive $139,384.
Taxpayers who traded in a vehicle this year can potentially save at tax time. In the past, residents had to pay 6 percent usage tax on the purchase price of a vehicle, but thanks to a law passed in 2014, they're entitled to a sales-tax credit that allows them to deduct the trade-in amount. That could save hundreds of dollars.
Got kids? Taxpayers with children in kindergarten through 12th grade in qualifying public and nonpublic schools -- and even those that are homeschooled -- could save a bundle on tuition, textbooks, uniforms, and other school expenses. Residents may be able to deduct half of the associated costs up to $5,000 for each dependent. Tax credits are also available for child care expenses, as well as child care providers and businesses donating to those organizations.
Renters and property owners may be eligible for tax relief by meeting certain requirements for the Property Tax Fairness Credit -- though many don't realize they qualify. Replacing the more limited Circuit Breaker credit, it is available to residents with adjusted gross income up to $33,333 if single or $433,333 if married filing jointly, head of household or qualifying widow(er). If real estate taxes were more than 6 percent of total income or total rent was more than 40 percent, you may be entitled to up to $600 or $900 if 65 years or older.
Through the state's Tax Checkoffs, residents can use part of their state refund to donate to the Chesapeake Bay and Endangered Species Fund, the Developmental Disabilities Services and Support Fund, or the Maryland Cancer Fund (or all three), and deduct the amount from their federal tax the following year.
Taxpayers may be eligible for numerous tax exemptions and deductions. Some of the more common include $700 for each taxpayer age 65 or older, and $1,000 for each dependent; less common ones include $2,200 for each legally blind taxpayer or spouse. Residents may also take certain deductions, including up to 50 percent of rent paid during the year (capped at $3,000), commuter costs that exceed $150 for up to $750 per person, and child or disabled dependent care up to $4,800 for an individual and $9,600 for couples.
To help offset heating costs for low-income residents, there's a home heating credit. Eligible residents may get a credit anywhere from $465 to upward of $1,270 depending on their income level and exemptions. It's important to submit the required form before Sept. 30, 2018.
Taxpayers saving for college can take advantage of a state tax deduction or credit, thanks to a recent change affecting 529 college savings plans. Individual taxpayers may deduct up to $1,500 for contributions to qualified plans, while married couples filing jointly can deduct up to $3,000. They can also opt to take a tax credit up to 50 percent of contributions, minus withdrawals, up to $500.
Taxpayers whose homes were damaged by hurricanes or flooding this year may be able to open a catastrophe savings account that can be used tax-free to pay for eligible expenses. Homeowners can put in up to $2,000 if their home insurance deductible is $1000 or less. If the deductible is over $1,000, they can contribute up to $15,000 or twice the deductible, depending on which is less.
Residents may be able to save a bundle come tax time from an extensive list of available tax credits that help reduce tax bills dollar for dollar (as opposed to deductions that just reduce the amount of taxable income). Many credits involve making donations to charitable causes, such as eligible agencies that help at-risk children, domestic violence victims, pregnant mothers, and even local sports organizations.
Taxpayers can save with tax credits including a range of options such as wildlife protection, helping to fund public schools, and child abuse prevention. The state also offers a Elderly Homeowner/Renter Tax Credit that helps renters and homeowners 62 and older with less than $45,000 in gross household income.
To encourage careers in farming, Nebraska offers a Beginning Farmer/Rancher program tax incentive. Qualifying farmers -- who don't have to be young to be eligible -- may be exempted from personal property tax up to $100,000 for agricultural land, and up to $500 credit for qualified financial management classes. Taxpayers that help beginning farmers with such things as land, livestock, and equipment may also be eligible for tax credits.
Nevada is another state with no income tax, which means residents aren't taxed on winnings at the state's casinos (though they are responsible for federal taxes on those). Small-business owners can save at tax time with Section 179, which allows deduction of the full cost of equipment up to $500,000, and 100 percent of home office expenses.
Wages and salaries aren't taxed by New Hampshire (there's also no sales tax) but those getting income from interest and dividends have to pay a 5 percent flat tax on earnings above $2,400 individually or $4,800 married filing jointly. There are additional exemptions of $1,200 for residents 65 or older; blind; or disabled and unable to work but under 65.
While a number of federal deductions are not allowed on the New Jersey state tax return, such as moving expenses, mortgage interest, IRA contributions and employee business expenses, Garden Staters still have available deductions in medical expenses that exceed 2 percent of income, including doctor's visits and dental care, and self-employed health insurance. In some cases homeowners and renters may qualify for a property tax deduction or credit for up to 100 percent of property taxes or $10,000, whichever is less (and for tenants, 18 percent of rent paid during the year).
If you're lucky enough to live to 100 or older in the Land of Enchantment and no one is claiming you as a dependent, you're exempt from state income tax. And if you're married at that age, you can exempt half of all community income and all of your income. Younger folks still may be able to make the most of numerous tax credits.
The Empire State offers taxpayers a lengthy list of tax credits that could come in handy. Popular ones include a college tuition credit up to $400, a child and dependent care credit, and a family tax relief credit of $350. Volunteer firefighters and ambulance workers can also claim $200 (or $400 for married couples when both volunteer), and individuals and families living in New York City may also be eligible for additional credits.
In recent years, North Carolina did away with several tax credits, but as long as a taxpayer continues to meet the eligibility requirements for those repealed credits they can still benefit from them. Additionally, the state allows tax credits for each dependent child. If you happened to rehabilitate a historic structure or mill facility, you may also be eligible for tax credits.
Taxpayers may be eligible for a number of tax credits, including a popular marriage credit. If an individual takes care of a family member who is disabled or age 65 or older, they may be eligible for a credit up to $2,000 per family member (with a total limit of $4,000) for qualified care expenses. Taxpayers may also save by making a contribution up to $10,000 (or $20,000 for couples filing jointly) to an eligible charity.
A tax reform package passed a few years back lets small-business owners deduct 100 percent of business income up to $250,000. Taxpayers saving for college can deduct up to $2,000 per person by contributing to the state's College Savings Plan. That number will jump to $4,000 for the 2018 tax year.
Taxpayers considering buying a new electric vehicle or converting a gas-powered one to electric can claim a credit for 45 percent of the additional cost compared with a standard gas vehicle with a cap of $1,500 -- on top of the federal credit of $7,500. (The credit doesn't apply to golf carts or go-carts.) Drivers of electric vehicles also narrowly avoided having to pay a $100 fee approved by the state, after the state Supreme Court deemed it too high.
Taxpayers in environmentally friendly Oregon may be eligible for tax credits totaling anywhere from $100 to $6,000 if they bought energy-efficient products or systems for their homes, such as solar panels or LED lighting. But they should make the most of it for the 2017 tax year; it looks like it's the last year for the credit.
Taxpayers are likely keenly aware that flat-tax Pennsylvania doesn't allow many of the deductions available on the federal return -- but there are a few, including employment-related expenses that aren't reimbursed by an employer, contributions to medical and health savings accounts, and contributions to 529 college savings accounts up to $13,000 per student.
Taxpayers saving for college should consider taking advantage of the state's 529 College Savings plans. Not only will their contributions grow free of state and federal tax, but Rhode Island allows taxpayers to deduct $500 per year for individuals and $1,000 for married couples filing jointly.
Among tax credits here are several new ones and updates people may not know about. To help offset an increase to the state's motor fuel user fee, drivers are now eligible for a credit for up to two vehicles or motorcycles to help cover fuel and preventative maintenance. The in-state college tuition credit also increased to 50 percent of tuition paid, up from 25 percent, up to $1,500 for two- or four-year colleges.
After benefiting from the lack of an income tax, South Dakotans can't deduct state income tax from federal returns but can still save by deducting state and local sales tax. Individuals and businesses can also benefit from a tax credit for donating to Scholarship Granting Organizations that help students in nonpublic primary and secondary schools.
Taxpayers don't have to pay a state "hall" tax on income from salaries and wages, but are required to pay a flat 4 percent tax on income from interest and dividend earnings, decreasing every year until the tax is gone. The first $1,250 of those earnings are exempt for single filers ($2,500 for joint filers). And people 65 and older with an income of $37,000 or less ($68,000 for joint filers), are also exempt. And starting next year, anyone age 100 or older will also be exempt.
No income tax is collected from Texans, who can save further by taking the state and local tax deduction (aka SALT) on their federal returns. And any taxpayers looking to restore or preserve a historic landmark may be eligible for the state's historic preservation tax credit program.
Taxpayers making a sacrifice to help those in need can be helped in turn by the live organ donation expenses credit of up to $10,000 for certain expenses (such as travel, lodging, or lost wages) when donating certain organs, including bone marrow. The state also offers credits for things such as retirement income, solar projects, and educational savings plans.
Vermont has one of the higher income tax rates in the country, but residents can still save thanks to a number of tax credit programs. Among the more popular is one helping working people offset the cost of caring for children and other dependents. The state also offers a rebate program to help with a percentage of rent paid for households where the annual income doesn't exceed $47,000.
Farmers who have had a particularly abundant year may want to consider donating excess food crops to a nonprofit food bank and reaping the Food Crop Donation Credit allows credit equal to 30 percent of the fair market value for the donated food up to $5,000. Non-farmers can take advantage of other deductions, including for child and dependent care.
Taxpayers 65 or older, or who are permanently and totally disabled, may subtract up to $8,000 from their federal adjusted gross income for West Virginia tax purposes. Those getting state pension payments, such as from the West Virginia Public Employees Retirement System, may deduct up to $2,000 regardless of age.
Low- to moderate-income working families may be eligible for for tax relief from the Wisconsin Earned Income Tax credit (in addition to the federal credit). Individuals or married couples age 62 or over, or the disabled, may also find some relief with the state's Homestead Credit.
Wyoming doesn't collect state income tax or tax intangible assets such as stocks and bonds. And retirees don't have to pay tax on Social Security, withdrawals from a 401(k), or other types of retirement income.
Generally, when you give money to a charity, you can use the amount of that donation as an itemized deduction on your tax return. However, not all charities qualify as tax-deductible organizations. While there are many types of charities, they must all meet certain criteria to be classified by the IRS as tax-deductible organizations. There are legitimate tax-deductible organizations in many popular categories, such as those listed below.
Married couples have the option to file jointly or separately on their federal income tax returns. The IRS strongly encourages most couples to file joint tax returns by extending several tax breaks to those who file together. In the vast majority of cases, it's best for married couples to file jointly, but there may be a few instances when it's better to submit separate returns.