As consumers, there are a few times of the year where our spending can get a little higher than normal. While people often budget ahead for occasions like holidays or birthdays, there’s one time of year in particular when things can add up really quickly — back to school.
According to Statista, in 2020, the average American household spent $789.49 on back-to-school (1) — nearly $100 more than in 2019.
With costs rising, families are looking for ways to save on necessities, not just for back to school but throughout the year. One way people do this is by taking advantage of their state’s tax-free weekend.
So what is a tax-free weekend? And is it actually worth it to shop during this timeframe? Are the deals amazing?
Let’s take a look.
What is Tax-Free Weekend?
A tax-free weekend, also known as a tax holiday, is when a state chooses to waive the taxes on eligible items for a specific period of time, usually a Friday to Sunday. These weekends generally occur in the late summer to coincide with consumers shopping for clothes, school supplies, electronics, and college dorm necessities.
Tax-free weekends are state-specific so the timing varies. Additionally, not every state chooses to participate, so before you start planning your excursion, you’ll need to check your state’s tax website. Some states also run more than one tax-free weekend per year.
Where Can I Save the Most on Tax-Free Weekend?
Every state has its own criteria for what items are included in tax-free weekends. School supplies, clothes, and footwear are the most common items, however, some states include things like electronics or appliances.
The items included in this tax-free weekend can also vary from year to year. In 2019, Texas included any products meant for water conservation. That same year, Mississippi exempted hunting supplies.
Each state determines what will or won’t be exempt, and in some states, only items under a certain dollar amount are eligible. For example, during the back-to-school tax-exempt weekend in Texas, only school supplies, clothing, footwear, and book bags that are under $100 are exempt.
Are There Any Drawbacks to Tax-Free Weekend?
Just because it’s a tax-free weekend doesn’t mean you'll automatically save money if you shop. It will depend heavily on what merchandise your state includes, and if those items are what you’re looking to purchase.
Another thing to think about is the value of your time. Tax-free weekends generally bring out large crowds to shop, so depending on what you need, saving $10 may not be worth battling the mall when it’s a complete madhouse. If you’re thinking you can avoid this altogether by shopping online, it should be noted that many states do not extend the tax-free weekend exemption to online retailers.
Also, think about what you actually need. Sometimes we get so caught up in the excitement of getting a “deal” that we end up buying way more things than we initially intended. Even if you saved on the tax, the extra $50 or $100 you didn’t budget on spending can quickly cancel out those tax-free savings.
Tax-free weekends can also mean high demand for the items people need at that specific time of year, like school supplies, so there’s also the risk of not being able to find what you actually set out to purchase.
Look for Savings All Year Long
When planning your strategy for taking advantage of tax-free weekends, also think about how you can save throughout the year. Just because something is on sale during a tax-free weekend doesn’t mean you’re actually getting the best price.
For example, let’s say you’re looking for a new laptop. During this tax-free weekend, that laptop is $100 off. However, that same laptop goes on sale at other times of the year and is often $300 off. By keeping an eye on the cost of items you know you’ll need in the future, you can actually save more money by buying at other times of the year, as opposed to just waiting for tax-free weekends.
Bottom line: tax-free weekends CAN be great for the budget, but having a strategy for finding deals all year long is always a great move for your finances.
Sources:
1. https://www.statista.com/statistics/286432/average-back-to-school-spending-in-the-us/
Russell D. Rivera, CFA, CFP® is the Founder and President of Voice Wealth Management (Voice) in New York, NY. He also likes to think of himself as a Personal CFO and Financial “Therapist” for entrepreneurs, young professionals, and their families. He helps clients make prudent financial decisions regarding spending, saving, investing, and planning while giving a voice to the individual client's financial priorities and experiences.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
This material was prepared by Crystal Marketing Solutions, LLC, and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate and is intended merely for educational purposes, not as advice.