Moving across the country is a major life decision which affects all areas of your life, including your finances. If you find a new job in a different state or simply want a change of scenery, there are several tax considerations to keep in mind when moving from one state to another. While the federal income tax is the same regardless of your state, various state taxes such as sales tax, state income tax and real estate taxes vary.
Making Large Purchases
Moving to a new state sometimes involves making a large purchase such as buying a new car. If you are planning to make a large purchase sometime in the near future, research the sales tax rates in your current state and the new state. If the sales tax rate is lower in your current state, you may stand to save a significant amount of money in sales taxes by making the purchase before you move. On the other hand, if the state you are moving to has lower sales taxes, holding off on the purchase until you move to the new state can save money. According to the IRS, Alaska, Delaware, Hawaii, Montana, New Hampshire and Oregon do no not have sales taxes.
State Income Tax
The state income tax rate varies from one state to another. According to the IRS, Alaska, New Hampshire, Tennessee, Florida, South Dakota, Washington, Nevada, Texas and Wyoming have no state income tax. When you move to a new state, factor the new income tax rate you will face into your income and budget. If you are moving to take a new job that pays only slightly more than your current one, increased tax rates could reduce the benefit of moving. For instance, getting a raise from $70,000 to $75,000 may not be worthwhile if your state income tax goes up by 10 percent. Conversely, if you are moving to a state with lower income taxes, your money could go further.
Where to Live
Within a given state, different cities, counties and administrative districts may have their own tax rates. For instance, real estate tax rates can be affected by the school district and other local laws. The tax rates that you face might be significantly different if you choose to live in a city center as opposed to a suburb or a rural area. Thoroughly research the real estate tax rates, sales tax rates and other taxes in different areas of your new city so that you can make an informed decision about the best and cheapest place to live.
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