In the last few years, I’ve noticed more people moving to different states than ever before. Their reasons vary, from cost of living, to taxes, to job opportunities, to retirement, to just needing a change of scenery. No matter what the reason for the move, there can be some serious financial implications. This is a discussion of upfront costs, tax considerations, risks to plan for, treatment of investments and property, and estate planning considerations.
Budgeting For The Move
Moving is expensive. All in, costs for a move to a new state can average between $950 and $17,000. If you are moving because of a job change, there’s a chance that your employer will supplement some of these costs. However, for a particularly big move, you may still end up taking on some of these expenses yourself.
Here are some of the major expense categories for a move to a new state:
- Boxes: Are you shipping boxes, hiring door to door movers, or renting a truck to move them? These all come with different cost considerations.
- Furniture: Are you going to try keeping and moving all your furniture or are you buying new items once you reach your destination? Get quotes for what these costs would be to plan for them.
- Specialty items: Does anything you want to bring require special care, such as a glass top table? These can add significant costs.
- Vehicle expenses: Are you driving yourself across states or are you shipping a car? Driving yourself can take you out of work for days but shipping can result in significant costs.
- Pets: Are you planning to fly, drive with your pets or hire a service to move them? Quote these services and make sure you meet compliance requirements for the option you choose.
- Airline tickets: Do you need to purchase plane tickets for yourself or loved ones? If you are going back and forth to view new homes or planning to ship a vehicle and take a plane to your new home, those costs can rack up.
- Added charges and tipping: Have you thought of every conceivable expense? If you haven’t, there will likely be charges that you haven’t budgeted for. Movers and other services also traditionally expect a tip for their services, so I would plan for costs being 15-25% higher than initial estimates.
After the actual move, you should create a new budget in accordance with your new living situation, considering your new net income, cost of housing, and the other expenses in your life.
Income Taxes
I grew up in California, so I have seen a slew of people moving from California to places like Florida, Washington, and Texas. What do all these states have in common? They don’t charge an individual state income tax. California’s top state income bracket is 13.3%, so when people are high income and move to these states, their net income can increase significantly.
Be aware that if you are moving during the year, you may have taxation attributable to both states. Work closely with your tax professional to ensure that you file correctly and manage your taxation.
Investments And Property
Taxation can also work differently in different states when it comes to investments and property. For instance, some states, like Idaho, incentivize saving for college so they give a tax deduction on contributions to their state-run 529 plan, in addition to tax deferment on growth, and tax-free distributions when used for qualified higher education expenses.
On assets subject to capital gains, some states don’t discriminate between capital gains and income on their taxes, and some charge a rate lower than ordinary income tax.
Property taxes, however, do not care where you live. If you move to Hawaii (state with the lowest property tax) and keep a property in New Jersey (state with the highest property tax), you still need to pay property taxes at the New Jersey rate.
Insurance And Risks
Some areas are subject to risks you may not have considered. If you are moving to the Midwest, you may risk tornado damage. If you are moving to the Southeast, you may face flood damage during hurricane season. If you move West, you might be at risk of wildfire damage. You may face more hazardous road conditions in the winter than you’re used to. Understand the risks where you’re moving and adjust your Property & Casualty insurance policies accordingly.
Estate Planning
If you move to another state, there may be different laws around granting Power of Attorney (someone who can act on your behalf if you become incapacitated), how assets pass, and how spousal assets are considered legally. If you own properties in multiple states and pass away, your heirs could also face probate, an extensive and costly process, in multiple states. A qualified estate planning attorney can help you update your plan and understand the nuances of your new state.
Conclusion
Moving to a new state has an impact on many different areas of your life. Planning ahead and understanding major implications of the move can save you from future headaches and potentially save you money as well.
This informational and educational article does not offer or constitute, and should not be relied upon, as tax, legal, or financial advice. Your unique needs, goals, and circumstances require the individualized attention of your own tax, legal, and financial professionals whose advice and services will prevail over any information provided in this article. Equitable Advisors, LLC and its associates and affiliates do not provide tax or legal advice or services. Equitable Advisors, LLC (Equitable Financial Advisors in MI and TN) and its affiliates do not endorse, approve, or make any representations as to the accuracy, completeness, or appropriateness of any part of any content linked to from this article.
Cicely Jones (CA Insurance Lic. #: 0K81625) offers securities through Equitable Advisors, LLC (NY, NY 212-314-4600), member FINRA, SIPC (Equitable Financial Advisors in MI & TN) and offers annuity and insurance products through Equitable Network, LLC, which conducts business in California as Equitable Network Insurance Agency of California, LLC). Financial Professionals may transact business and/or respond to inquiries only in state(s) in which they are properly qualified. Any compensation that Ms. Jones may receive for the publication of this article is earned separate from, and entirely outside of her capacities with, Equitable Advisors, LLC and Equitable Network, LLC (Equitable Network Insurance Agency of California, LLC). AGE-5954789.1(09/23)(exp.09/25)
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