How much can you save in taxes by moving to another state?
I am shocked that high earning people choose to live in California. It must be the weather.
Take a look at the chart below. It comes from the Tax Foundation’s “State Individual Income Tax Rates and Brackets for 2016”.
This chart shows what the highest state income tax bracket is in each state. California is the highest at 13.3%. There are six states with no income tax: Florida, Texas, Nevada, Wyoming, South Dakota, and Washington. Moving to one of these six would obviously save the most money, but the other states would also provide a savings over California.
I did some example calculations to illustrate the money that could be saved by high earners who move out of state. To be clear, it’s not just high earners that would save money. It may also benefit average earners. Let’s take a look.
A single worker who earns $150,000 per year:
From CA FTB Schedule X: tax is $2,316.43 plus 9.3% of amount over $52,612
A family (maybe husband & wife both work) who make $400,000 per year:
From CA FTB Sched Y: tax is $4,632.86 plus 9.3% of amount over $105,224
I know the weather isn’t as good in other states as it is in Southern California, but maybe one could use the money saved on taxes to buy some raincoats or pay for air conditioning. (That’s a lot of raincoats, umbrellas, and jackets by the way.)
Its not just the savings on taxes you would benefit from. The cost of living in these other states is lower. Home prices are far lower. For equivalent money, you could purchase a bigger or nicer home. The property taxes are higher, but all in all, high earners should consider leaving California. It’s almost like the other states are paying them to.
For comments or questions, reach out on twitter: @iammrmarshall