Kitchen Table Economics

Beware of Holiday Taxes

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The holidays are upon us, which means—you guessed it—more taxes. Here are three examples:

  1. Travel taxes. If you’re travelling for the holidays, get ready to pay a little extra. On a three-day trip, you will pay over $100 in additional taxes. This is the sum of sales, hotel, and rental car taxes charged for these services—without even considering airline taxes. Airline fees also include an excise tax, passenger facility charges, and a per-segment adjusted fee. For example, JFK airport will cost more than $36, while a Washington, D.C. airport comes out to roughly $20. Even driving comes with gasoline taxes of 49 cents per gallon on average. (Read JCN Member Chip Rogers’ explanation here.)
  2. Holiday bonuses. If your employer gives out an end-of-year bonus, it will probably come with a heavy tax. These gifts are often taxable income depending on the amount of the bonus. Why? Because the Internal Revenue Service considers cash payments or physical gifts of value as “supplemental wages,” so they are therefore taxable to the employee. In some cases, you might lose half of a cash bonus to taxes! Even if your employer hands out an iPad or luxury bottle of wine, it is still considered income and should be reported on a W-2.
  3. Sales taxWhat’s a holiday blog post without bringing up sales taxes? 45 states and the District of Columbia collect statewide sales taxes, while local sales taxes are collected in 38 states. In Alabama and Washington, for example, you’ll pay almost nine percent in combined state and local sales tax rates. California has a 7.5 percent state-level sales tax alone. Five other states—Indiana, Mississippi, New Jersey, Rhode Island, and Tennessee—clock in at seven percent. Hidden taxes on steak and wine bottles also add up, affecting shoppers nationwide.