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- With the back-to-school shopping season in full swing, families should take every opportunity they can to save money
- One way to lower costs is to shop during a tax-free weekend, if one is offered in your state
- To boost your savings further, pair tax-free weekend shopping with a credit card that offers rewards on back-to-school purchases
There’s no dispute that the cost of consumer goods is soaring. Even though the U.S. inflation rate is down for the 12 months ending July 2023, prices are still sky-high in many sectors. Since what was once economical may now be expensive, the prospect of shopping for your child’s school items can be daunting.
To help take the edge off of this financial burden, look for your state’s tax-free weekend and try to make your purchases then. On these weekends, you won’t be charged sales tax on certain items, up to a fixed amount, making them the perfect time to set kids up with the things they need for school, at a discount. To increase your savings even further, check for unused gift cards — 47 percent of U.S. adults have at least one — and charge your purchases to a credit card that offers rewards.
Who pays sales tax?
As a consumer, you pay a variety of taxes throughout the year and for various events, including taxes on the money you earn as income and on your home as property tax. Another common charge is sales tax, which you’re charged when you buy many physical goods. The money generated from sales tax goes into state coffers to pay for such things as infrastructure, fire and police departments and public schools.
There are currently only five states in the country that don’t add this tax to a purchase: Alaska (which does allow municipalities to assess local sales taxes), Delaware, Montana, New Hampshire and Oregon. If you live in one of these states, you enjoy a sales-tax-free holiday all year round. If you don’t, however, you’ll pay this charge on eligible items every time you visit the cash register or hit the “buy” button online.
Depending on the state you live in, the sales tax rate can be low or high. A 2023 roundup of rates conducted by the Tax Foundation found that Colorado has the lowest state sales tax rate, at 2.9 percent, while California has the highest rate at 7.25 percent.
When you can get a sales tax break
Even if you reside in a state that does charge sales tax on purchases, you can avoid paying the tax during certain times of the year. Many states give residents who want to purchase items for education (and emergencies) a break on sales tax on these special weekends, making the things you need to buy just a little more affordable.
Check the Federation of Tax Administrators list of 2023 State Sales Tax Holidays to see if your state is on it, when the tax-free dates are for back-to-school items and a general breakdown of what you can get without taxes being added. A few examples for 2023 include:
|Clothing and footwear up to $100
|July 24-Aug. 6
|School supplies up to $50, clothing up to $100, computers up to $1,500
|Clothing and footwear up to $100
|Aug. 26-Sept. 4
|School/art supplies, instruction materials, computers up to $3,000
Depending on the state where you live, some of those costs can be significantly lower when you shop during the sales-tax-free holiday.
For example, New Jersey has a 6.625 percent sales tax rate. If you purchase a computer with a $3,000 price tag, the sales tax would be just under $200. But if you buy it between August 26 and September 4, you get to put that cash back in your pocket or spend it on something else your child needs for school.
Maximize your tax savings with a rewards credit card
You can up your savings even more by making your purchases with a credit card equipped with a generous rewards program. There are a few ways to deepen the discount:
Spend towards a welcome bonus
Apply for and use a new credit card that comes with a sign-up bonus. When you use your new card to purchase your children’s school supplies, all of the money you charge can go toward the card’s minimum spend. Once you hit the threshold, you’ll qualify for the card’s bonus.
For example, the Bank of America® Customized Cash Rewards credit card will give you a $200 online cash rewards bonus after you spend at least $1,000 with the card in the first 90 days of opening the account. That computer you bought for $3,000 will easily get you there. If you live in a state like New Jersey that charges 6.625 percent sales tax, the $200 tax savings plus the $200 bonus will put you ahead by nearly $400. All you need to do is pay the balance in full by the due date, and the discount is yours.
Use a cash back card that rewards back-to-school purchases
If you have the Citi Custom Cash℠ Card, you can earn 5 percent cash back on purchases in your top spend category every billing cycle, up to the first $500 you charge (then 1 percent). Therefore, if you shop for your child’s school needs and the $500 you spend represents your largest category, $25 can come back to you in the form of Citi’s ThankYou rewards points. You can redeem these points for cash back, gift cards and a variety of products. Add that money to your tax savings and you’ll lower the cost of those purchases. It may not seem like a lot at first, but every bit helps when money is tight.
Rotating category cards can help if the current quarter’s spending categories reward your back-to-school purchases. Unfortunately, most are rewarding summer fun from now through September. For example, the Chase Freedom FlexSM* is currently offering 5 percent on gas stations, EV charging stations and select live entertainment (up to $1,500 in purchases per quarter, then 1 percent). The Discover itⓇ Cash Back card is offering 5 percent back on gas stations and digital wallets — up to $1,500 per quarter (then 1 percent). Purchases outside these categories get you 1 percent back.
If you have a variety of back-to-school purchases to make, a good flat-rate cash back card might be your best bet — and if you have one that delivers 2 percent, all the better.
Use a 0% APR balance transfer
Finally, if you want to make some large purchases but don’t have all the cash to pay for them in full before the due date, you may also consider a credit card that doesn’t charge any interest for a specific number of months.
In general you will need good credit, but if you can qualify for a 0 percent APR card, you can make your purchases and carry over the balance without financing fees increasing the cost. The Capital One Quicksilver Cash Rewards Credit Card, for instance, gives you 15 months to pay off purchases, interest-free (0 percent intro APR on purchases for the first 15 months, then 19.99 percent to 29.99 percent variable ongoing APR). It also comes with a $200 cash bonus to claim after you charge $500 on purchases within the first three months of opening the account.
The bottom line
As you prepare for the upcoming school year, it pays to know which days you can shop for the things your child needs so you can pay nothing (or a lot less) in sales tax.
Given ongoing concerns about a recession, it’s more important than ever to identify deals to lower your costs when you can. Charge those back-to-school purchases with one of the best rewards cards, in conjunction with special sales tax free days, and you can magnify your savings when you need it most.
*The information about the Chase Freedom FlexSM has been collected independently by Bankrate.com. The card details have not been reviewed or approved by the issuer.