Do Tribal Income Sources Affect Your Tax Return?

Perhaps the most confound time of the year is tax season, especially for the Native American tribes. And so many people ask, "How do these income sources affect their tax returns?" or "How can it help or hinder them?"

In this Q&A, we will provide some clarity for questions like those.

Q: Are tribal members subject to Federal Income Tax?

A: Yes, in most cases. While federally recognized tribes themselves are sovereign entities and generally not subject to federal income tax, individual tribal members are usually considered U.S. citizens for tax purposes. This means you'll likely need to file a federal income tax return, just like other citizens.

Q: How are per capita distributions taxed?

A: Per capita distributions are payments made to tribal members from the tribe's revenue (e.g., casino profits, natural resource extraction). These payments are generally considered taxable income and must be reported on your federal tax return. However, there can be exceptions if the distributions are derived from trust land or certain treaty rights.

Q: Is income earned on tribal lands taxable?

A: It depends on the source and nature of the income. Income earned from activities directly tied to treaty rights or traditional tribal practices, such as fishing, hunting, or farming on tribal lands, may be exempt from federal income tax. However, income from other sources on tribal lands, like operating a business, may be taxable.

Q: What about wages earned off of tribal lands?

A: Wages earned from employment, whether on or off tribal lands, are generally subject to federal income tax and FICA taxes (Social Security and Medicare). This applies to both tribal government employment and private sector jobs.

Q: Where can I get help with my taxes?

A: The IRS offers Publication 5424, "Income Tax Guide for Native American Individuals and Sole Proprietors," which provides detailed information on tax issues relevant to Native Americans. You can also seek assistance from a qualified tax professional or your tribe's tax assistance program.