Do Amish Pay Taxes? How Taxation Impacts Traditional CommunitiesPersonal Taxes
Tax obligations of all US citizens are similar regardless of their religious affiliations or communities they belong to.
So if you’re wondering whether the Amish pay taxes, then the answer is yes. Members of these traditional communities file taxes every year, like the majority of US citizens and residents. However, they’re exempt from certain taxes.
Taxation doesn’t have a major impact on Amish communities due to their self-reliance. In fact, Amish families often run successful businesses that generate substantial income and strengthen the economy of their communities.
In this article, we’ll look at taxes federal and state authorities can and cannot levy on Amish communities and see how taxation affects them.
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Tax Obligations of Amish Communities
Old Order Amish, New Order Amish, Beachy Amish Mennonite, and Amish Mennonite communities spread over 31 states. Still, 62% of the Amish population lives in Pennsylvania, Ohio, and Indiana.
Consequently, taxes members of different Amish communities pay often depend on the state where they live. Certain tax obligations apply to all members of Amish communities in the US, regardless of their location.
Amish are issued Social Security Numbers at birth or after joining the Anabaptist church even though they don’t receive social security benefits, so they can file tax returns without difficulty.
Let’s look at the taxes members of Amish communities pay.
The federal, state, and local authorities levy income taxes on all members of Amish communities who earn an income during a year. Most Amish work on farms, so any income they generate through the sales of farm produce is taxed.
Some members of these communities run small retail stores or food stands selling farm products and bulk foods. Hence, they’re required to pay income taxes on the profit they make through their businesses.
Moreover, Amish often work in home construction, build furniture, or manage auctions, which is why they must pay taxes.
Like all American citizens, Amish fall in different tax brackets depending on their annual income, so how much tax they owe to the government at the end of the year depends on their earnings.
Contrary to popular belief, Amish often shop at supermarkets, salvage stores, and even order items through the mail. Consequently, they pay sales tax for each item they purchase in stores operated by the Amish or the ‘English’ (an Amish term for non-Amish people).
Sales tax is regulated at the state level. That’s why Amish communities in Montana don’t pay sales taxes due to the state’s regulations, while Amish in Pennsylvania pay a 6% sales tax for each product they purchase.
The Amish don’t consume products that contradict their beliefs. Hence, they don’t pay taxes for products they refrain from using.
Public School Taxes And Education Expenses
Most Amish children don’t attend public schools. Instead, they attend private Amish schoolhouses constructed on land not used for farming.
Most Amish schools are owned and funded by the community, creating additional expenses for each family. Over 90% of parents choose to send their children to private schools that offer education at 1st through 8th-grade level.
Amish children are exempt from school attendance past the 8th grade, so most don’t attend high school.
Amish families that own land in school districts must pay public school taxes to the district. Consequently, members of these traditional communities contribute a portion of their taxes to public school funding.
The mileage rate is one of the primary revenue sources for local governments. Taxes depend on the property’s size, fair market value, and the state’s tax rates.
The sizes of Amish farms range from five to over a hundred acres, which makes it difficult to determine the average property tax Amish landowners pay.
Pennsylvania’s average annual property tax is $3,442, while Ohio residents spend approximately $3,390 on property tax per year.
It’s safe to assume that most members of Amish communities who live in these states pay around $3,400 for property taxes every year. On the other hand, the average annual property tax for Indiana Amish is between $1,800 and $1,900.
Tax Exemptions For Amish Communities
Even though Amish pay federal, state, and local taxes, they’re not required to pay all taxes levied on US taxpayers. Let’s look at the taxes the Amish don’t have to pay.
Although Amish have Social Security numbers, they’re exempt from paying social security taxes on religious grounds.
Their self-reliance is based on a bible verse that states that people who don’t provide for those close to them, whether family members or neighbors are worse than non-believers. The Amish rely on their community rather than the government if they fall on hard times.
Members of Amish denominations don’t pay Medicare and Medicaid taxes or receive social security benefits.
The same is true for the Amish employed by non-Amish employers, so businesses that hire a member of an Amish community don’t have to withhold FICA taxes from their salary.
In addition, most Amish choose not to receive stimulus checks or any other support from the federal government.
The Federal Unemployment Tax Act is tax employers pay for each employee until their salary reaches the $7,000 mark. Businesses that employ the Amish are exempt from this tax due to their religious beliefs.
Still, Amish employers must withhold FUTA taxes if they employ non-Amish workers. Self-employed Amish are exempted from paying social security taxes, but only if they acquire a certificate from the IRS which permits them to refuse public insurance.
Moreover, the Amish can file Form 4361 if they want to be exempt from self-employment taxes due to their views regarding public insurance.
Alcohol And Tobacco Taxes
The so-called ‘sin taxes’ refer to excise taxes for products Amish consider sinful. The Amish don’t drink alcohol or use tobacco products which is why they’re unlikely to purchase them.
Gambling is a sin according to all variants of the Christian religion, including Anabaptism. As a result, the Amish are prohibited from participating in such activities and don’t take gambling winnings they’d have to pay taxes for.
The Amish are famous for their insistence on using horses and buggies for transportation. They believe that a motorized vehicle can divide families by allowing them to travel long distances in a relatively short time.
Still, not all Amish are opposed to modern forms of transportation, as members of some denominations agree to ride in cars operated by non-Amish. Some communities hire passenger vans when they have to travel long distances.
In addition, some Mennonite and Beachy Amish own cars and purchase gasoline. Whether Amish pay gasoline taxes depends on their denomination, but the vast majority of the Amish population in the US doesn’t use cars or buy gasoline.
Availability of Tax Relief to Amish Communities
The IRS offers a variety of tax relief options to all US taxpayers. Consequently, the Amish can claim:
However, not all Amish children get a social security number at birth, which makes Child tax credits unavailable to their families.
Many Amish families wish to refrain from using these tax relief options as they prefer to share the responsibilities of raising their children with the members of their communities.
Even though the Amish have the same right to claim different tax deductions and credits as all other US citizens, they often choose not to due to their religious beliefs and way of life.
Homeowner relief is unavailable to Amish taxpayers because most households need to qualify for energy-efficient residential property credit. In addition, the Amish don’t use electric cars, which is another reason they cannot use this form of tax relief.
Although they’re technically eligible for education tax credits, the Amish taxpayers only use them because their children usually attend school in the 8th grade.
Credit for Qualified Retirement Savings Contributions is also unavailable to the Amish because most members of these traditional communities choose to refrain from participating in retirement plans even though they’re allowed to do so by the law.
Application Process For Tax Exemptions Available to Amish Communities
Being born into an Amish family doesn’t automatically exempt you from taxation. Each Amish community member must undergo a lengthy certification process conducted by the IRS after they join their church in their late teens or early twenties.
The process starts with filing Form 4029, Application for Exemption From Social Security and Medicare Taxes, and Waiver of Benefits.
The individual mustn’t receive social security or any other public insurance benefits prior to the application in order to qualify for this exemption. The IRS reserves the right to reject the application if it determines the applicant doesn’t meet the requirements.
In case the application is approved, an Amish taxpayer will only be exempt from Social Security and Medicare taxes if they’re self-employed or work in partnership with other members of their community who received the same exemption.
Frequently Asked Questions
The Amish object to having their photos taken, which is why they often don’t have ID cards. Still, this doesn’t prevent them from filing taxes, as they use their SSNs for identification purposes while filing tax returns.
Some counties levy the ‘buggy tax’ on Amish communities. The fee helps repair road damage caused by horse-drawn carriages the Amish use for transportation.
All businesses hiring Amish employees must withhold Social Security and Medicare taxes from their salaries unless the IRS approves their exemption from these taxes.
The exemption remains effective as long as the taxpayer meets the requirements for this tax exemption. Hence, once the IRS grants them its approval, most Amish are exempt from social security taxes and benefits for the rest of their lives.
The Impact of Taxation on Amish And Traditional Communities
Amish families can have difficulties claiming child credits if their children don’t yet have social security numbers. In addition, property taxes can be a substantial financial burden for Amish who own sizable farms.
The exemption from FICA and FUTA enables the Amish to pay less for federal taxes if they meet all the requirements.
The impact of taxation on traditional communities in the US doesn’t depend only on the federal government, as the effect of taxation on the Amish varies from state to state.
Logan is a practicing CPA and founder of Choice Tax Relief and Money Done Right. After spending nearly a decade in the corporate world helping big businesses save money, he launched his blog with the goal of helping everyday Americans earn, save, and invest more money. Learn more about Logan.