Should I Move to a State Without Income Tax?

Aug 19, 2022

More and more Americans are thinking about moving to a state without income tax. This is because state income taxes have been on the rise in recent years, while prices and inflation continue to go up. Additionally, many people are working remotely now, so they don't need to live near their jobs. So, what are the pros and cons of moving to a state without income tax?

The most obvious advantage is to avoid paying state income taxes. The below states have no state income tax:

- Alaska

- Florida

- Nevada

- New Hampshire

- South Dakota

- Tennessee

- Texas

- Washington state

- Wyoming

If you live in one of these states, you'll save money on your state income taxes. Additionally, if you have a job that allows you to work remotely, you can live anywhere in the country. So, if you want to move to a state with lower cost of living or nicer weather, you can do so without worrying about your income tax bill.

However, there are some disadvantages to moving to a state without income tax. First, you may have to pay other taxes, like sales tax or property tax, which can offset the savings from not paying state income tax. Second, if you move to a state without income tax, but then get a job in another state with income tax, you'll have to pay that state's income tax. Finally, if you move to a state without income tax and then later move back to a state with income tax, you may have to pay a "recapture" tax on the money you saved by not paying state income taxes in the past.

In addition, as a business owner, simply moving to another state does not move your LLC. You may need to dissolve or move your LLC to your new home state. Otherwise, you would have to pay LLC fees in multiple states. Some business owners also purchase a mailbox in a state with no income tax as a primary business address. This is fine, but remember that if you are an employee of your business that you will be responsible for paying state income taxes and payroll taxes based on where you physically are working. Simply moving the business address does not exempt you from certain taxes in your state of residence.

So, should you move to a state without income tax? It depends on your individual circumstances. If you're looking to save money on your taxes, it may be a good idea. But if you think you may move back to a state with income tax in the future, it may not be worth it.


What do you think? Would you move to a state without income tax?