Moving States: What Does it Mean for Your Finances?

Moving States: What Does It Mean for Your Finances?

Working remotely and ready to hightail it to a mountain chalet or beach? Before you move to a new state, consider the impact on your finances.

Published by Motley Fool Wealth Management Originally posted on Tue, Apr 26, 2022 Last updated on January 10, 2024

read time 5 min read

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Working remotely is one of the lasting effects of the pandemic. Because of this ability to work from anywhere, roughly 2.4% of people, or 4.9 million Americans, have already moved to another city, town, or state since 2020.1 No one knows how long the remote trend will last. But it's been one of the reasons so many have moved over the past several years and why some people are still considering putting down roots elsewhere. 

To us, it makes sense: Why live in areas with high housing and other costs (including the cost of your happiness) when you no longer need to be near the office? Instead, some workers are headed towards places offering a lower cost of living, a better climate, or even closer (or possibly farther!) proximity to family. But before taking the leap to a new state, consider these four factors.

States taxes

There are currently nine states (Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming) with no income tax. New Hampshire currently only taxes interest and dividend income, and Washington levies an income tax on capital gains only for certain high earners.2

Moving to a state with no income taxes may sound great, especially if you’re moving from a high-tax state like California, where the top marginal rate is 13.3%, the highest in the country.3 However, it is important to note that all states need to generate revenue, and states without income taxes find other ways to pay for roads, schools, and other infrastructure.

For example, the bulk of Florida’s general revenue (75% to 80%)4, comes from the state’s 6% sales tax.5 Tennessee’s sales tax is 9.55%, the highest in the nation. Gas tax is another revenue stream. For example, Washington imposes a 49.4 cents per gallon tax on gasoline, one of the highest in the nation. Other states generate their income from property taxes, personal property taxes (like on a car or a boat), and other local taxes. The property tax rate in New Hampshire is 1.89%,6 the third-highest in the country.7 Estate taxes also differ by state.

All of the different permutations of taxes levied by state and local governments may mean that your projected tax savings from zero or low-income taxes may not be as much as you hoped when you set your moving plans in progress.

Wills, trusts, and other legal issues

In addition to taxes, each state has its own estate laws. For instance, you may need to create a new will due to differences in state law. Similarly, some states also have a probate process that is more onerous than others. This can impact your estate planning strategies. You should always consult tax professionals for specific tax advice.

One potential financial impact to be cognizant of is how assets are split upon divorce. There are currently nine community property states in the U.S.8 This means that any property or asset acquired during a marriage will be split 50/50 upon dissolution. In common law states, on the other hand, property acquired during the marriage is not automatically owned by both spouses. Moving from a common law state to a community property state and vice versa can directly affect assets owned.

Given that each state has different laws for estate planning and inheritance rights, it is important to review your documents to ensure they are within the legal guidelines. You should always seek advice and reach out to an estate planning attorney in your new area to go over your will, living will, power of attorney, and other estate documents.

Investment portfolio

Your investment portfolio may require some adjustments as well. Each state has its own capital gains tax rates. This may impact your investment strategy, such as harvesting gains or losses for tax purposes. It may also affect some of your holdings, like municipal bonds. Municipal bonds that are tax-exempt from the original state you lived in may no longer be tax-exempt in your new state.

Moreover, most states tax investment income and income from work at the same rate. There are nine states–Arizona, Arkansas, Hawaii, Montana, New Mexico, North Dakota, South Carolina, Vermont, and Wisconsin–where long-term capital gains are taxed less than ordinary income. These states also offer tax breaks where you can exclude capital gains from your taxable income.9

Given the significant changes in capital gain taxes by state, you may need to review your investment holdings to minimize unnecessary taxes when moving to another state. Consult a tax or financial professional to review and adjust your portfolio as needed.


Unlike retirement and brokerage accounts, 529 savings plans are typically operated by states. Is it worth funding a 529 plan in your new state or sticking with your old one? For example, some states offer a tax deduction for contributing. But before jumping on that tax benefit, you should review the plan’s investment options, management team, historical performance, fees, and other investment factors to determine if the new state’s plan is a better option.

The cost of college is something else to weigh. Are the state schools a likely option for your child? Then bear in mind in-state versus out-of-state tuition for the state you are moving to. If education is the primary reason to move, it may be worth considering changing your residency to take advantage of in-state tuition.

Look under the hood

Yes, you can work from anywhere. And if you’re considering a move to find your “happy,” then all the power to you. But before you decide to move, it is important to do the necessary research on how different state laws can impact your wallet. In other words, don’t get lured by states with no income taxes without understanding the rest of the tax structure or implications for your estate or child’s education. Because while you should not let state laws drive where you lay down new roots, it's prudent to be aware of their impact today and for your future.

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Footnotes,  accessed Apr. 25, 2022, March 9, 2022, Feb. 15, 2022, Oct. 27, 2021, Oct. 27, 2021, Apr. 19, 2022, Mar. 9, 2022, accessed Apr. 25, 2022, Sept. 2020

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