Native American Tax Exemptions
Will Rogers was a comedian, cowboy, and Cherokee whose common sense humor made him famous in the vaudeville era. He liked to make light of complicated issues from politics to taxes. On taxes, he had a lot to say.
“The income tax has made more liars out of the American people than golf has,” he wrote. And, “the only difference between death and taxes is that death doesn't get worse every time Congress meets."
As trying as taxes are, though, there are some rules that give Native Americans special exemptions from both state and federal taxes.
Note: the following is for informational purposes only; it is not intended to serve as individual tax advice.
First, most tribes have agreements with state governments to exempt their citizens from paying state income tax on wages that were earned on the reservation where they live. If your employer already withheld state income tax from your check, you may need to file an adjustment.
Second, some income and tribal benefit payments are exempt (i.e. not taxed) at the federal level. This includes:
Per capita payments from funds the Secretary of the Interior holds in a tribal trust account. (This is different from per capita payments for gaming or other tribal revenue distributions. Your tribe will issue a 1099 for these payments, and you can learn more about reporting them on your taxes here.)
Income derived directly from lands held in trust (for example, grazing rights, natural resource sales, crop rentals)
Needs-based payments to promote the “general welfare” of tribal members (your tribe will usually provide information about whether a benefit falls under the general welfare exclusion, and you can learn more about this rule here.)
Income from the exercise of treaty-based fishing rights or the sale of reindeer products by Alaskan Natives
Even if you aren’t required to file a tax return, you may want to consider doing so. You may be eligible for earned income or child tax credits that could result in a refund. In addition, tax returns are required to apply for tuition assistance, grants, loans, and more. To learn more about tax credits and reasons to file, check out this great piece from the First Nations Development Institute.
Last, you may qualify for free tax prep services from the Volunteer Income Tax Assistance (VITA) program. Find an office serving your location in Indian Country here.
