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What Teens Should Know About Taxes

What Teens Should Know About Taxes

If you have ever gone shopping then you know about sales tax, but do you know about every other tax under the sun? When you buy a house, rent an apartment, buy land, buy a car, pay for license plates, get a job, or have dinner, you are bound to pay some sort of tax. For some reason, general education does not focus enough on things that are relevant to students once they graduate high school, such as hidden tax fees.

I recently purchased a car from a private seller and knew a little bit about taxing and that I should expect to pay it heavily on my new car. Yet, when I arrived at the dealer, I was met with a smaller amount to be paid than anticipated. Why was that, you may wonder? I was under the impression that sales tax (being around 9% or 10% in my state) was the average amount of taxes taken out of everything. I had been working multiple different jobs since graduating high school and never once stopped to ask what the percentage was being taken from my paychecks. I just accepted that the money would be automatically withdrawn and moved on.

If someone had never purchased a car before (I.e. a recent graduate of high school or college), then finding out a tax needed to be paid at all might come as a shock. Fortunately, I had bought a car prior to this instance with my mother and had to pay taxes on it. The only problem is that the first time I bought a car, the tax was 10%, but this time it was only 3%. I asked the lady at the DMV (Department of Motor Vehicles) why the tax was different, and she explained to me that the state I live in only does a 3% tax on vehicles, and this was a recent change. I accepted the information, paid the due, and once again moved on.

Here is some useful information to consider when making large purchases in Alabama:

 

  1. The sales tax in Alabama is pretty high compared to other states in the nation, and in the counties nearest me it is either 9% or 10%. This means that for every dollar you spend, you pay 10 cents in taxes. If you spend $10, you will pay $1 in taxes. This only applies when shopping.
  2. Do not assume you know the exact value of the taxes on your vehicle purchase. The state now assigns an estimated value for your vehicle and taxes it according to that. So, if you purchase a car for $5500, but it is valued at $6900, then you will be paying a 3% or 4% tax on $6900.
  3. Always, always research your local taxes before making large purchases, because taxes can change. Or there could be additional taxes that you may not have even known about.

 

Here is a link for further knowledge of taxes:

https://www.irs.gov/newsroom/irs-offers-tips-for-teenage-taxpayers-with-summer-jobs

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