The “Other” Taxes You Pay

You’re well aware of income taxes and sales taxes. You see federal and, where applicable, state income taxes withheld from wages; you handle your income tax obligations on annual income tax returns. If you work, you pay Social Security and Medicare taxes on your earnings. If you live in a place with sales taxes, you see the state and, where applicable, local charges when you make purchases. However, there are numerous government charges—some are visible while many are invisible—that you may be paying every day. Here is a roundup of some of the other taxes you may pay and whether you can deduct them.

Federal Excise Taxes and Other Federal Fees

Excise taxes are a type of federal sales tax or fee. Prior to the 16th Amendment to the Constitution allowing the income tax, the federal government was run entirely on excise taxes. Today, they continue to be only about 3% of total federal revenue.

Gasoline tax. Years ago, the federal tax on gasoline you use for your vehicle was displayed at the pump; no more. Today, this tax is 18.4¢ per gallon. If you use 50 gallons of gas a month, you’ll pay more than $9 dollars (over $110 annually).

Airline ticket tax. Every time you fly, domestically or internationally, you pay a federal excise tax for the privilege. Currently, these taxes are:

• 7.5% tax on the base ticket price.
• A domestic segment tax of $3.70 per person per segment (a single takeoff and single landing).
• An international travel facilities tax of $16.30 per person for flights that begin or end in the United States, or $8.20 per person for a flight that begins or ends in Alaska or Hawaii.
• 6.25% tax on the amount paid for transporting property by air.

Don’t think you can avoid the tax by taking another mode of transportation. There’s a ship passenger tax of $3 per passenger. There is also a variety of fuel-related taxes that bus lines incur and pass on to riders.

Telephone taxes and fees. If you ever look closely at your monthly phone bill, you’ll see a variety of charges, many of which you may not even be aware of. Different charges apply to landlines and cell or smartphones. Here are some of the charges:

• Regulatory charge to help defray government charges, such as number administration and license fees, imposed on the carrier and passed through to customers.
• Federal Universal Service Charge imposed on the carrier to support universal service (which means giving cell phones to those who cannot afford it).
• Administrative charges that the carrier passes through to customers (in addition to their monthly usage costs).
• Line charges.

Industry-specific excise taxes

There are a variety of excise taxes that apply to specific industries or products. These taxes are on imposed on the manufacturer or business offering the product or service, but likely they are passed on to consumers. Examples of industry-specific excise taxes include:

• 10% on indoor tanning services.
• Heavy highway vehicle use tax.
• Manufacturer’s tax on fishing equipment, arrows, and vaccines.

Deductibility: You cannot separately deduct these taxes and charges. However, if you incur any of these costs for business, they are a business deduction. For example, all of the phone-related costs are part of the bill that is deductible for business.

State and Local Taxes and Fees

Like the federal government, with the exception of Alaska, Delaware, Montana, New Hampshire, and Oregon, states and various localities also impose sales taxes. And there are numerous state and local fees and charges levied for a variety of things. Here are some examples:

• Admissions tax to amusement parks, movie theaters, and sports arenas.
• Alcoholic beverages tax.
• Excise tax on gasoline at the pump. Find the state tax in your state through the American Petroleum Institute (http://www.api.org/oil-and-natural-gas-overview/industry-economics/~/media/21ebd0b62eba42b1965ee82effb6585d.ashx). For example, in New York and California, the state tax is 30.5¢ per gallon, in addition to the federal tax, making the total tax per gallon 67.7¢ per gallon.
• Lodging tax.
• Realty transfer taxes to convey property and deed recording fees.
• Tobacco tax on cigarettes.

Deductibility: As in the case of federal charges, you cannot separately deduct these taxes and charges. However, if you incur any of these costs for business (e.g., a lodging tax on accommodations while traveling away from home), they are a business deduction.

Homeowners’ charges and fees. If you own a home, you face a variety of taxes and fees. Some are deductible as real property taxes, while others are not.

• Assessments by homeowners’ associations. These costs are not deductible.
• Assessments for government services. Those related to local improvements and benefits, such as repairing sidewalks, are deductible. Those that specifically improve your property, such as tying your property to a sewer line, are not deductible. However, you can add these nondeductible costs to the basis of your home; this will minimize gain when you sell your home.

Bottom Line

Government taxes and charges, in addition to income taxes, Social Security and Medicare taxes, and general sales taxes, can eat up a sizable portion of your income each year. Be aware of what you pay and determine whether any charges may be deductible.