State Tax Move Impact

One of the most significant financial factors when considering a move between states is the difference in state income tax. Unlike federal taxes, which are uniform across the country, state income taxes vary dramatically—from zero in some states to over 13% in others. This variation can mean thousands of dollars more or less in your pocket each year, making it essential to understand before relocating.

State income tax systems fall into three main categories: no income tax states, flat tax states, and progressive (graduated) tax states. Nine states currently have no state income tax on wages: Alaska, Florida, Nevada, New Hampshire (dividends/interest only), South Dakota, Tennessee, Texas, Washington, and Wyoming. This doesn't mean these states are "tax-free"—they often rely more heavily on property taxes, sales taxes, or other revenue sources.

Understanding your effective state tax rate—not just the top marginal rate—is key to accurate planning. A state with a 5% flat tax takes 5% of every dollar. But a state with a 10% top rate may have lower effective rates for most incomes due to progressive brackets and deductions. This calculator helps you see the actual tax impact, not just headline rates.

Step 1: Choose Your Comparison Mode

Select "Straight Move" for a simple before-and-after comparison with the same income in both states. Choose "Different Income" if your income will change when you move (e.g., new job with different salary). Use "Partial Year" if you're planning a mid-year move and want to see split residency estimates.

Step 2: Select Your States

Choose your current state (State A) and the state you're considering moving to (State B). The calculator includes all 50 states plus DC. You can easily swap states to compare the move in reverse or try different destination states.

Step 3: Enter Your Income and Details

Input your gross annual income. Select your filing status. Choose whether to include federal tax in the comparison (federal tax is usually the same in both states, so excluding it helps focus on state differences). Optionally add local/municipal tax rates if applicable.

Step 4: Analyze Your Results

Review the side-by-side comparison showing state tax, total tax, effective rates, and after-tax income for each state. The difference summary shows how much more or less you'd pay in the new state. Use the AI assistant to explore specific questions about your move or get explanations of the tax differences.

The Nine No-Income-Tax States

Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming have no state income tax on wages or salaries. New Hampshire taxes only interest and dividends (phasing out by 2027). For high-income earners, relocating to these states can mean significant tax savings—a California resident earning $500,000 could save over $50,000 annually in state income tax by moving to Texas.

The Trade-offs

States without income taxes must generate revenue elsewhere. Texas has high property taxes (often 2-3% of home value annually). Washington has the highest state sales tax rate when combined with local taxes (over 10% in some areas). Florida relies heavily on tourism-related taxes and property taxes. Tennessee has one of the highest combined state and local sales tax rates in the nation.

Consider Your Full Tax Picture

Before moving solely for tax savings, calculate your total tax burden. If you're buying an expensive home in Texas, higher property taxes might offset income tax savings. If you spend heavily on taxable goods, high sales taxes matter. Renters with modest spending might benefit most from no-income-tax states, while high-net-worth homeowners need more nuanced analysis.

Flat Tax States

Flat tax states charge the same rate on all taxable income. Examples include Pennsylvania (3.07%), Illinois (4.95%), Indiana (3.05%), Michigan (4.25%), Colorado (4.4%), and North Carolina (4.75% for 2024). Utah and Massachusetts also use flat rates around 4.55-5%. Flat taxes are predictable—you know exactly what percentage of additional income goes to state tax.

Progressive Tax States

Progressive (graduated) tax states have multiple brackets where higher income is taxed at higher rates. California has the highest top rate at 13.3% for income over $1 million. New York reaches 10.9%, while New Jersey tops out at 10.75%. Hawaii, Minnesota, Oregon, and Vermont also have high top rates. However, many progressive states have relatively low rates for modest incomes.

Which Is Better for You?

Flat taxes tend to benefit higher earners who would otherwise fall into top brackets in progressive states. Progressive taxes often benefit lower and middle-income earners through lower initial brackets. Compare your specific income: someone earning $60,000 might pay more in flat-tax Illinois (4.95%) than in progressive Georgia (which starts at 1% and only reaches 5.49% on income over $10,000).

Highest State Income Tax Rates (2024)

California leads with a 13.3% top rate, followed by Hawaii (11%), New Jersey (10.75%), Oregon (9.9%), Minnesota (9.85%), New York (10.9% including NYC), and Vermont (8.75%). These rates typically only apply to income well above $200,000-$1,000,000, so median-income earners pay much lower effective rates.

Lowest Non-Zero State Income Tax Rates

Among states with income taxes, the lowest flat rates include Arizona (2.5%), North Dakota (1.95% top rate), Pennsylvania (3.07%), and Indiana (3.05%). Several states have recently reduced rates: Idaho moved to a 5.8% flat tax, Iowa is phasing down to 3.9%, and Arizona cut its rate to 2.5% in 2023.

Real Dollar Impact

To illustrate the real impact: someone earning $150,000 might pay approximately $13,000 in California state income tax, $6,500 in New York, $4,600 in Pennsylvania, or $0 in Texas. Over a 10-year career, that California-to-Texas move could mean $130,000 more in after-tax income—not counting investment growth on those savings.

Establishing Domicile

Moving states isn't just about physical relocation—you must establish legal domicile in your new state. This typically involves changing your driver's license, voter registration, bank accounts, and professional licenses. You should also update your will, trusts, and other legal documents. High-tax states may audit former residents who claim to have moved, so documentation is essential.

Partial-Year Residency

When you move mid-year, you'll typically file as a part-year resident in both states. Each state generally taxes income earned while you were a resident. However, rules vary: some states use actual income allocation, others prorate based on days of residency. States may also tax income "sourced" from that state regardless of residency (like rental property income or business income).

Credits for Taxes Paid to Other States

Most states offer credits for income taxes paid to other states to prevent double taxation. However, these credits are often limited—if you paid $10,000 to California but your home state would only charge $5,000 on that income, you may only get a $5,000 credit. This "partial-year mode" in the calculator doesn't model these credits, so actual liability may differ.

Statutory Residency Traps

Some states have "statutory residency" rules: if you maintain a home in the state and spend more than 183 days there, you may be treated as a resident regardless of your domicile. New York and California are particularly aggressive with these rules. Remote workers splitting time between states should carefully track their days and consult tax professionals.

Property Taxes

Property taxes vary enormously by state and even by county. New Jersey has the highest average effective rate (over 2.2%), while Hawaii has the lowest (under 0.3%). Texas averages around 1.7%, partially offsetting its lack of income tax. A $500,000 home in Texas might cost $8,500/year in property tax versus $1,500/year for the same value in Hawaii.

Sales and Use Taxes

Combined state and local sales tax rates range from 0% (Oregon, Montana, Delaware, New Hampshire, Alaska has no state rate) to over 10% in parts of Louisiana, Tennessee, and Washington. If you spend $50,000/year on taxable goods, a 10% versus 0% sales tax means $5,000 difference annually.

Other State Taxes

Consider estate/inheritance taxes (only 12 states plus DC have them), gas taxes, vehicle registration fees, and occupational licensing costs. Some states have local income taxes (New York City, several Ohio cities, most Pennsylvania municipalities) that can add 1-4% on top of state rates.

Cost of Living Adjustments

Lower taxes don't always mean more money in your pocket. A $100,000 salary goes much further in Texas than in California due to housing costs, but some high-tax states offer better public services, schools, and infrastructure. Consider your total financial picture, not just tax liability.

Timing Your Move

If moving from a high-tax to a low-tax state, consider timing. Moving in January means you'll be a non-resident of your old state for nearly the entire year. If you expect a large bonus, stock vesting, or business sale, completing these after establishing residency in the low-tax state can save significant taxes—but only if done properly and documented thoroughly.

Income Timing Strategies

If you control the timing of income (stock option exercises, bonus payments, business distributions), coordinate with your move. Exercise options after establishing residency in a low-tax state. Defer bonuses if possible. However, some states have "clawback" rules for deferred compensation earned while a resident—consult a tax professional before implementing these strategies.

Documentation and Audit Defense

High-tax states actively audit departing high-income residents. Keep records of your move: new lease/mortgage, utility bills, driver's license change date, voter registration, gym membership, doctor and dentist records, children's school enrollment. The more "indicia of domicile" you can show in your new state, the better your defense if audited.

Work with Professionals

For significant moves or high incomes, consult a CPA or tax attorney familiar with both states' rules. The cost of professional advice is minimal compared to potential audit adjustments, penalties, and interest. This is especially true for business owners, those with complex compensation, or anyone moving from aggressive audit states like California, New York, or New Jersey.