Relocating to a new state can be exciting. But it may have tax consequences that can follow you long after you settle in. Evaluating these issues may help you plan your move and limit filing complications, prevent residency issues, and identify possible tax savings.
How will your income be taxed
States vary in how they tax income. Twenty-six states and the District of Columbia implement a progressive income tax (tax increases as income increases), while fifteen apply a single tax rate to taxable income and nine impose no state income tax.
For some, the opportunity to pay no state income tax may be the primary driver to move to Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas or Wyoming, where there is no income tax. The state of Washington does not have an individual income tax but will impose a 9.9% tax on income of those who earn more than $1 million a year beginning January 1, 2028.
Keep in mind, however, that many states without an income tax may rely more heavily on sales taxes, property taxes, or other taxes to generate revenue. Understanding how your new state taxes income may help you avert any unexpected tax issues.
Is your move temporary or permanent?
When moving to another state, the distinction between residency and domicile (the state you consider your permanent home) may determine whether your income is taxed in one or both states.
Although you can have more than one residence, you can only have one domicile. Typically, states determine your domicile by evaluating several factors, including:
- Where you own property
- The number of days spent in the state, and
- The location of your financial and family ties.
Buying a home in a no-tax or low-tax state may not be enough to potentially eliminate income tax liability in your former state if you still maintain strong connections to that state.
Tax filing considerations
If you are one of the millions of Americans who work remotely, you may live in one state while your employer is located in another. In this situation, you may have to file tax returns in both states. You might also be subject to double taxation. Some states apply a "convenience of the employer" rule that may allow the state where your employer is located to tax your income as if you were working in the state. Fortunately, several states provide a credit for taxes paid to another state, which can offer some relief against double taxation.
How will retirement and investment income be taxed?
States also differ on how they treat retirement income, interest, dividends, and capital gains.
Some states impose a tax on retirement income, while others may provide exemptions or even exclude some retirement income from taxation. Strategically timing when you complete a large stock sale, convert an IRA, or take a withdrawal from your retirement account may help reduce your tax liability.
Also, if leaving as much of your wealth to your heirs is a priority, keep in mind that 12 states impose an estate tax, and five states impose a separate inheritance tax.
If taxes are a concern...
Consider consulting with a tax professional on these complex multistate tax issues before taking any specific action.
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Prepared by Broadridge Advisor Solutions, with additional content from Canby Financial Advisors.. © 2026 Broadridge Financial Services, Inc.