Yahoo Finance The Money Guy Show: Should You Move to Another State To Save on Taxes?
Where you live can make a big difference in terms of your net income. That’s because states and local governments have different taxes, such as income, sales, and property taxes.
Trump-Era Tax Cuts Are Set To Expire: What Retirees Should Know
Related: What To Do If You Owe Back Taxes to the IRS
In a recent clip from The Money Guy Show, hosts Brian Preston and Bo Hanson discussed whether it’s worth moving to another state to move money on taxes.
For example, moving from a state like California, with a relatively high-income tax rate, to a state with no state income tax like Tennessee, could save you a lot of money, perhaps even enough to buy real estate based on the difference, as some real estate companies have promoted, said Preston.
That said, some states with no income tax have high property tax rates — or at least local governments within some of these do — so it’s important to do the full math to see how a move would affect you. Texas, for example, has no personal income tax but the sixth-highest average effective property tax rate among U.S. states, according to PropertyShark.
Another reason why you might move to another state is for retirement purposes. Not only might you enjoy the quality of life by retiring in another state, but it can also save you money on taxes. Georgia, for example, could be a good option for retirees due to certain retirement income exclusions for state income tax purposes, noted Hanson. One of those tax advantages is that if you’re 65+, you can exclude $65,000 in retirement income from Georgia income taxes annually.
However, it’s important to remember that while smart tax planning can help you improve your finances, that shouldn’t drive all your decision-making, said Preston. “There’s a lot more to life than just minimizing taxes,” he added.
Indeed, you might prefer to pay more in taxes to live near family and friends. Or you might like the lifestyle in a certain area, like living in a vibrant city or an area with abundant nature, even if the taxes are relatively high. You also might find that the economic opportunities available to you in a certain state enable you to earn more money than you could elsewhere, which could make tax savings moot. So, consider the full financial and lifestyle advantages and disadvantages before moving to a different state to save money on taxes.
More From GOBankingRates
This article originally appeared on GOBankingRates.com: The Money Guy Show: Should You Move to Another State To Save on Taxes?
