If you’re thinking about moving from your current locale, you’re not alone. Americans are on the move for many different reasons: Remote work is increasingly popular and allows employees to live wherever they have access to WiFi, while tax changes introduced by the 2017 Tax Cuts and Jobs Act (TCJA) limited the important SALT (State and Local Tax) deduction to $10,000 for single and married individuals. That deduction had previously made living in high-tax states less costly for affluent individuals.
When you combine those two factors alone, it makes sense that people are looking to see where the grass may be greener. There’s also a strong possibility that states may begin adding new taxes to make up for budget shortfalls – so, it’s no surprise there may be a significant number of people moving. Some say it has already started, using Florida’s net gain of $16 billion in adjusted gross income since 2018 as proof.
Whether states begin adding new taxes or not, it seems clear that people are not staying put the way that they used to, and many are basing their decisions about where to go on tax considerations. If you have found yourself starting to look at real estate ads in a different state, it is important that you take a 360-degree view of what moving would mean for you. As attractive as it may seem to pick up your things and go to a state with a more appealing tax scheme, there are other things to think about, including ensuring that if you move, you do so in a way that accomplishes your tax goals.
Here are the different factors you need to make sure to include in your decision-making process.
TAXES ARE NOT THE ONLY CONSIDERATION
Moving to another community is a shock to the system in more ways than one and moving to an entirely different state will have an even greater impact. Not only do you need to think about the quality-of-life issues involved, but also the implications for those who own multiple homes in multiple states, as they will need to make a choice as to where their primary residence is going to be, and make sure that they can prove that they are compliant. Non-tax-related considerations include:
THE TAXES WORTH CONSIDERING
If you’ve already included the non-tax considerations listed above and you are still intent on making a move, then it is time to understand what doing so will mean to your economic picture. It’s a good idea to sit down and discuss your plans with your financial advisors long before putting your home up for sale, as you may have second thoughts after thinking about all of the consequences of a move. Among your considerations are:
MADE UP YOUR MIND? HERE ARE YOUR NEXT STEPS.
Like everything else in life, relocating to another state and making it your primary residence is not as easy as just deciding to do it. There are essential steps that need to be followed in order to reap the tax rewards that you are seeking. Here are just a few of those steps: it is important that you do your due diligence to make sure that you have complied with everything required of your new home.
Getting established in a new community is a challenge, but it is an important step to ensure that you will be able to prove your state residency and get the tax advantages you seek. Include contacting our office on your to-do list to make sure that you have addressed everything as needed and reviewed and updated your estate plan as well. You may also need to address the particulars of where some of your family members live and go to school to make sure that all of the legal and tax requirements have been met.