The eruption of remote working opportunities has led to new migration habits. Instead of turning to large cities where opportunities are ripe, workers have moved to states with a lower cost of living and better affordability.
In fact, a Bankrate survey from this year shows that 31% of young workers relocated, many to their own hometowns or even their parents’ homes.
Although making this type of move can be difficult, there’s more nuance than just the moving process itself.
Filing taxes adds another layer of complication. So, what tax considerations should young professionals make before relocating?
Some states have no income tax, which can feel a little bit like receiving a small pay raise. In fact, this is the reason why so many people have moved to Texas and Washington.
However, states with no income tax often offset this lack of income by increasing costs in other areas, such as sales and property taxes. Even more, commuting, public services, infrastructure, and more may end up costing more in these states, as they often lack fully realized public transportation.
On the other hand, moving to a state with income tax means having a different understanding of how to plan for tax season.
Some states have a flat rate, while others tax based on annual income. If you have already moved, but your employer is located in a state like New York, you will still have to pay income tax there regardless of where you are living.
While navigating tax time can be challenging, it shouldn’t deter professionals from making moves in their lives. However, planning in advance can save workers trouble as they make this transition.