Thinking of Moving to a Low-Tax State? Consider These Factors First
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by Matt Whittaker
If you live in a high-tax state, you may have considered moving to take advantage of a lower-tax jurisdiction.
John Iammarino, California-based principal and founder of retirement planning company Securus Financial, said a quarter of his clients—most of whom are 60 or older—have considered whether they should move out of the state. By leaving California for Nevada or Texas, for example, some of his clients could save more than $100,000 just in taxes over the course of 25 years, given similar other expenses.
According to TurboTax, as of the 2019 tax year, seven states—Florida, Texas, Alaska, Nevada, South Dakota, Washington, and Wyoming—don’t have an income tax. Tennessee and New Hampshire don’t tax ordinary income, but they do tax interest and dividend income. Meanwhile, in addition to California, states with high income taxes include Hawaii, Oregon, Minnesota, and Iowa.
States that have higher personal income taxes are often more progressive and focused on income distribution, noted Alex Reffett, principal and cofounder of registered investment advisor East Paces Group. So if you have a low income, you might benefit more by living in these states. But if you have a higher income, then the higher tax could be a disincentive to live there, and you’re less likely to require state services paid for by the higher income tax.
