Thinking About Moving? Don't Overlook the Tax Implications

With the rise of remote work and changing financial priorities, many individuals—whether working professionals or retirees—are considering a move to another state. Maybe you’re seeking better weather, lower living expenses, or proximity to family. But before you pack up and relocate, take a close look at the tax implications. A move that seems financially beneficial at first glance may come with unexpected tax consequences.

More Than Just Income Tax

It may sound like a great idea to move to a state with no personal income tax, but that’s just one piece of the puzzle. Many states offset the absence of an income tax with other levies that could affect your bottom line. When evaluating your options, consider:

• Property Taxes – Some states have high property tax rates, which can significantly impact homeowners.
• Sales Taxes – If you’re moving to a state with a high sales tax, your everyday expenses could increase.
• Estate or Inheritance Taxes – A few states impose taxes on estates or inheritances, which could affect your long-term financial planning.

If your potential new home state does have an income tax, dig deeper. Some states tax only wages but not dividends or interest. Others offer tax breaks on pension income, retirement plan distributions, or Social Security benefits. Understanding these nuances can help you make an informed decision.

Establishing Domicile: Key to Avoiding Double Taxation

If you want to leave behind the tax burdens of your current state, you must properly establish legal domicile in your new one. Your domicile is your permanent home—the place you intend to return to, even if you spend time elsewhere.

Each state has its own rules for determining domicile, and failing to sever ties with your old state properly can result in double taxation—where both states claim you owe taxes. Additionally, if your domicile isn’t clear when you pass away, your estate could face tax claims from multiple states.

To solidify your new residency:

• Buy or lease a home in your new state and, if possible, sell or rent out your previous residence.
• Update your address on legal documents, insurance policies, and financial accounts.
• Obtain a driver’s license and register your vehicle in the new state.
• Register to vote and establish relationships with local professionals (doctors, financial advisors, etc.).

Taking these steps promptly after moving can help ensure that your new state legally recognizes your domicile status.

Look Before You Leap

Before making a big move, do your homework. Tax laws vary widely, and what seems like a tax-friendly destination at first may come with hidden costs. Consulting a tax professional can help you navigate potential pitfalls and develop a strategy that aligns with your financial goals.

Thinking about relocating? Contact us to evaluate the tax impact before making a final decision.

The HoganTaylor Tax Practice

If you have any questions about the content of this publication, or if you would like more information about HoganTaylor's Tax practice, please email Tony Otto, Tax Practice Lead, at jotto@hogantaylor.com.

INFORMATIONAL PURPOSE ONLY. This content is for informational purposes only. This content does not constitute professional advice and should not be relied upon by you or any third party, including to operate or promote your business, secure financing or capital in any form, obtain any regulatory or governmental approvals, or otherwise be used in connection with procuring services or other benefits from any entity. Before making any decision or taking any action, you should consult with professional advisors.