Why You’ll Still Pay Oklahoma Grocery Tax
Oklahoma is eliminating its state grocery tax, but that doesn’t mean groceries will be tax-free. Here's what you need to know.
Oklahoma is finally eliminating its 4.5% state tax on groceries, an initiative that took two years to achieve. State lawmakers estimate the tax cut will save each family an average of $648 per year. However, other estimates range from savings of $125 a year for a family earning $40,000 to high-earning households saving an average of $408 per year.
Gov. Kevin Stitt who signed House Bill 1955 into law earlier this year, expressed pride in the bipartisan effort. "Oklahomans have waited for this day for years, and I'm proud to be the Governor that Oklahomans chose to eliminate the state portion of the grocery tax."
However, while the grocery tax cut will save Oklahomans money, shoppers will still pay sales tax when they visit the grocery store, some more than others. That’s because not all food items are covered under the Oklahoma tax cut, and local taxes can vary dramatically depending on which part of the state you shop in.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
The grocery tax cuts become effective on August 29, 2024. So, here's more of what you need to know.
Oklahoma grocery tax cut
Oklahoma’s grocery tax cut becomes effective Thursday, August 29, 2024. So, families should see a change in their grocery bills soon.
But it's important to note that the tax cut only applies to the state’s 4.5% portion of sales tax. So, Oklahomans will still pay local sales tax on all types of groceries, which can reach as high as 7% in some areas of the state. That means some residents will still pay $70 in sales taxes for every $1,000 spent on groceries once the law takes effect.
Because the tax cut doesn’t apply to local taxes, residents might pay even more grocery taxes in the future, if counties and cities raise their sales tax rates. However, the new law prohibits them from doing so until at least July 1, 2025.
What groceries will be exempt in Oklahoma?
Not all grocery items will be exempt from Oklahoma’s 4.5% state sales tax.
- Ready-to-eat prepared foods will not be tax-exempt.
- Oklahoma’s 4.5% state tax will still apply to grocery deli items.
- Heated foods will still be taxed at the current rate.
So, families who routinely purchase these types of items might not notice savings as significant as families who don’t.
Oklahoma income tax cut
Oklahoma was one of only about a dozen states that still tax groceries. Now that the state’s grocery tax is eliminated, Gov. Stitt is turning his attention to eliminating Oklahoma’s income tax. Nearby states have already taken steps to reduce income taxes, and bordering state, Texas, imposes no individual income taxes.
When speaking of the state’s income tax, Stitt said, “We think we need to put Oklahoma on a path to zero” and that if Oklahoma tax cuts don’t keep up with other states, it will get “left behind.”
Since passing the grocery tax bill, Oklahoma House lawmakers advanced two bills that would cut state income taxes, to eliminate them over time.
Related Content
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.
Katelyn has more than 6 years of experience working in tax and finance. While she specialized in tax content while working at Kiplinger from 2023 to 2024, Katelyn has also written for digital publications on topics including insurance, retirement, and financial planning and had financial advice commissioned by national print publications. She believes knowledge is the key to success and enjoys providing content that educates and informs.
-
Focus on These Five Critical Areas in Retirement Planning
Worried about how you'll pay for your retirement? It can help to structure your finances around five key areas: taxes, income, medical, legacy and investments.
By Gaby C. Mechem Published
-
Is Downsizing Right for Your Retirement?
The lower costs of a smaller home in retirement might sound appealing, but be ready for the trade-offs that come with making this big decision.
By Lena McQuillen, CFP® Published
-
New 2025 Child Tax Credit Announced: How Much Is It?
Family Tax Credits Explore the new IRS-adjusted amounts for popular family tax credits.
By Gabriella Cruz-Martínez Last updated
-
Three Ways to Avoid the Mansion Tax
Property Tax Some homebuyers have found creative loopholes around the mansion tax, but are they legal?
By Gabriella Cruz-Martínez Last updated
-
Three Creative Ways to Lower Your Retirement Taxes
Tax Tips You can apply key minimalism concepts for potential tax savings. Here’s how.
By Kate Schubel Published
-
States That Offer a Child Tax Credit in 2024
Child Tax Credit Fifteen states plus the District of Columbia currently offer a child tax credit. Here’s how much you can get.
By Gabriella Cruz-Martínez Last updated
-
Three Tax Reasons to Retire in Panama
Retirement Taxes With low property taxes and tax-free foreign income, this tropical paradise could make you rethink retirement as a U.S. expat.
By Kate Schubel Last updated
-
Is the IRS Coming for Your Gambling Winnings?
Tax Tips The latest tax audit on unreported income points to high-income, high-wealth gamblers. Could
By Kate Schubel Published
-
Best States to Buy Chocolate Candy Tax-Free
State Taxes There’s something spooky this Halloween and it’s not just the ghouls. Find out if your state’s sales tax takes a bite out of sweet savings.
By Kate Schubel Last updated
-
Five Ways Your Boss Can Step Up in the Aftermath of a Hurricane
Tax Relief The IRS offers some tax advantages for employers that financially help their employees during federally declared disasters.
By Gabriella Cruz-Martínez Published