How to save on back-to-school shopping with tax-free weekends

There’s no disputing that the cost of consumer goods has soared. Even though the U.S. inflation rate is down for the 12 months ending in June 2024, prices are still slow to fall in many sectors. Since what was once economical may now be expensive, the prospect of shopping for your child’s school items could be daunting.

And sales taxes are an extra burden.

In states like Louisiana, the combined state and local tax rate adds up to over 9.5 percent according to the Tax Foundation, which makes the cost of buying school supplies that much more of a financial burden on parents.

Who pays sales tax?

As a consumer, you likely pay a variety of taxes throughout the year and for various events, including income taxes on the money you earn and property taxes on your home. 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 expenses such 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 purchases: 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.

Tax-free weekends, strategic shopping can add up to savings

One way to take the edge off this back-to-school season is to wait for your state’s tax-free weekend to make your purchases. On these weekends in participating states, you can purchase select items or categories of items, such as clothing or electronics, without owing sales tax, making it a good time to set kids up with the things they need for school.

But it’s not the only way to save.

To increase your savings even further, check for unused gift cards — 47 percent of U.S. adults have at least one unused gift card, gift voucher or store credit, according to a Bankrate’s 2023 Gift Card Survey — and charge your purchases to a credit card that offers rewards.

Or you can shop strategically.

Angela Davis, a Maryland mother of two, shared that instead of shopping during Maryland’s 2024 tax-free holiday, she finds it more effective to shop for back-to-school throughout the summer by paying attention to the circular sales and even making the two- or three-hour drive to tax-free Delaware.

While Maryland’s 6 percent sales tax may not be a major consideration for Davis, rates in your state could be higher (or lower). A 2024 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. Adding in local sales taxes can make that expense even higher. So when you’re shopping for your children’s school supplies, you may want to catch a break wherever you can.

When you can get a sales tax break

If you reside in a state that does charge sales tax on purchases, watch for opportunities to purchase items for education (and emergencies) during those special “holidays,” making the things you need to buy more affordable.

Consider, for instance, if you need to buy a new $400 laptop for your soon-to-be college student. Even a break on 6 percent sales tax would save you $24 on the purchase. Multiply that out to additional purchases of clothes and other school supplies and the savings can add up.

Check the Federation of Tax Administrators list of 2024 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 2024 include:

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, Tennessee has a 7 percent sales tax rate and local taxes that can push the amount above 9 percent. If you purchase a computer with a $1,500 price tag, even a 7 percent sales tax adds $105 to your total. But if you bought it between July 26 and 28, 2024, you were able to put that cash back in your pocket or spend it on something else your child needs for school.

Although tax-free holidays can be helpful for parents looking to save on back-to-school supplies, sometimes it’s not worth the wait. In states like Connecticut and Maryland, the sales tax holiday begins just two weeks before school starts, which can be far too late to gather everything on the school supply list. Davis shared that waiting for Maryland’s tax-free week just isn’t feasible for her family.

“Well, you know, [redacted child’s name] goes to private school, so her uniform shirts are $30 a piece,” Davis explains. “Last year we waited too long and her sizes were out of stock when we went to buy them. By the time tax-free week rolls around, I’ve already bought most of their stuff or put it on layaway since school for them starts like two weeks later.”

Maximize your tax savings with a rewards credit card

Although inflation is trending downwards, paying for back-to-school items is still a challenge for many parents. There are some non-tax-related ways, however, to ease that burden, including making smart use of a credit card.

Spend toward a welcome bonus

Apply for and use a new credit card 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 earning the card’s welcome bonus. Once you hit the threshold, you’ll qualify for the card’s bonus. Not to mention, if you get a rewards card, your spending also earns rewards which can be used to further offset the cost of school supplies.

For example, the Bank of America® Customized Cash Rewards credit card has 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 $1,500 will easily get you there. If you live in a state like New Jersey that charges 6.625 percent sales tax, the $99 tax savings plus the $200 bonus will put you ahead by nearly $300. Remember to pay the balance in full by the due date so interest doesn’t eat into your savings.

Use a cash back card that rewards back-to-school purchases

The sting of back-to-school purchases is less intense when you know you’re earning cash back with every swipe of your card. And when you use one of the best cash back credit cards that offers rewards on back-to-school purchases, you stand to add on to your tax holiday savings.

• The Discover it® Cash Back card offers 5 percent back on rotating categories — up to $1,500 per quarter (then 1 percent, activation required). Purchases outside these categories get you 1 percent back. From July to September 2024, the 5 percent categories include purchases at Walmart and grocery stores.

• The Blue Cash Everyday® from American Express offers 3 percent cash back at U.S. supermarkets, U.S. gas stations and U.S. online retail purchases (up to $6,000 spent per calendar year in each category, then 1 percent).

• The Bank of America Customized Cash Rewards card lets you earn 3 percent back on the purchases in the bonus category of your choice from the following list: gas, online shopping, dining, travel, drugstores or home improvement. You’ll also earn 2 percent back at grocery stores and wholesale clubs and 1 percent on all other purchases (3 percent and 2 percent earning is on up to $2,500 in combined purchases per quarter, then 1 percent)

By adding that cash back to your tax savings — or even if you don’t worry about tax-free holidays — you’ll essentially lower the cost of those purchases as long as you pay off your balance in full and don’t accrue interest charges.

Still, however tempting it is to chase credit card rewards while shopping for school supplies, it’s important not to use that as an excuse to overspend and carry a balance.

Use a 0% APR purchase offer

Finally, if you want to make some large purchases but don’t have all the cash to pay for them in full right away, you may also consider an intro 0 percent APR credit card.

In general, you will need good to excellent credit, but if you can qualify for a 0 percent APR card, you can make your back to school purchases and avoid the interest charges while you pay it off over the intro period of a year or longer.

The Wells Fargo Active Cash® Card  for instance, offers a 0 percent intro APR on purchases for 12 months and then a 19.49%, 24.49%, or 29.49% Variable APR. There’s also a $200 cash rewards bonus after spending $500 within the first three months of account opening.

If you decide to apply for Active Cash, spending $1,500 on school supplies would earn you a total of $230 in cash rewards between the 2 percent cash rewards and earning the welcome bonus. As long as you paid off the balance before the intro period ends, you’d pocket that cash back without paying interest.

The bottom line

As you prepare for the upcoming school year, there are a variety of tactics that can help you save money on all those back-to-school needs.

Even though inflation is inching its way down, it’s still smart to identify opportunities to lower your costs when you can. Make back-to-school purchases with one of the best rewards cards, pair that with any sales tax-free days your state offers and coupons or sales and you can magnify your savings. Just be mindful of staying within your budget and paying off your credit card each month to keep those savings in your pocket.