Remote work has convinced many of us that we can do our jobs regardless of where we are located. This new approach is making many think about moving to a new location to be closer to family, enjoy nicer weather or to save money. Additionally, many people facing retirement move to an area with a lower cost of living to reduce their living expenses. If you are thinking about packing up and getting out of Dodge, be sure to consider taxes before loading the moving truck.
Look at All the Taxes That You’ll Have to Pay
It may seem like a no-brainer to simply move to a state with no personal income tax (currently Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming), but you must consider all taxes that can potentially apply to state residents. In addition to income taxes, make sure you look at property, sales, and estate or inheritance taxes too. For states that do have an income tax, what types of income do they tax? Some states, for example, don’t tax wages but do tax interest and dividends. And some states offer tax breaks for pension payments, retirement plan distributions and Social Security payments.
Establish Legal Residence
The simplest and most obvious way to establish domicile is to buy or lease a home in the new state and sell your previous home (or rent it out at market rates to an unrelated party). Then change your mailing address on passports, insurance policies and other important documents. Getting a driver’s license in the new state and registering your vehicle there also helps. Be sure to take these and other steps as soon as possible after moving.
Do Your Research
When looking into whether the grass is greener in another state, do some research and contact us. We can help you avoid unpleasant tax surprises.