The Benefits of Moving to Tax-Friendly States as a Remote Worker
By Natalia Wolting • Jan 5, 2024
The remote work revolution brought on by the pandemic is still thriving in 2023 as 12.7% of workers classify themselves as being fully remote. This employment trend is only expected to grow in the next few years as a study by Glassdoor reported that by 2025 22% of American workers will be remote. Because of this trend, many remote workers can choose where they live based on personal preference rather than job location. This ushers in immense possibilities regarding quality of life and cost of living but one major advantage that often goes unnoticed is the opportunity to relocate to a state with a more favorable tax system.
Tax-friendly states allow remote workers to retain more of their hard-earned money so they can build their wealth and achieve their financial goals such as purchasing a new home or saving more for retirement. Several states are considered tax-friendly due to lower sales taxes, property taxes and even 'sin' taxes on items like alcohol or tobacco. Understanding the overall impact that relocating to one of these states can have on your financial health can help remote workers decide if moving to states like Texas or Kentucky is going to be to their benefit.
More Money in Your Wallet
The most compelling benefit of relocating to tax-advantaged parts of the country revolves around avoiding high taxes and keeping more of what you earn. Some states offer favorable income tax rates compared to others. Property taxes also vary considerably by state and locality. By choosing low-tax states, remote workers can experience substantial bottom-line savings and greater cash flow which can be used for goals like getting ahead financially and upgrading their lifestyle over the long run.
Maximizing Income and Future Assets
In addition to sales and property taxes, certain states impose little to no taxes on investments, estate taxes, pensions and more. States like Nevada, Wyoming, and Alaska score huge points for minimizing tax exposure that cuts into long-term assets. For remote workers building towards major future goals like retirement and passing on wealth to future generations, picking advantageous states provides asset protection and growth opportunities other states simply can’t match.
Tax Incentives
Low-tax states further separate themselves from the pack by offering special incentives, exemptions and credits that enable new residents and investors to capitalize financially. For example, remote workers looking to relocate to places like Ketchikan, Alaska could also receive an additional $2,000.
States like Florida, Nevada, Alaska, Washington, South Dakota and Texas have no state income tax - making them attractive for many remote workers. Remote workers relocating to Lincoln County, Kansas could also qualify for a state income tax waiver. Some of these states do make up for having no income tax by having higher sales or property taxes so that should be factored in before settling on a new location.
More Affordable Cost of Living
In addition to lower taxes, many tax-friendly states such as Indiana boast affordable living costs when compared to other states. Not only can workers avoid high property taxes but they can also save money through cheaper housing, groceries, transportation and utilities. This enables residents to make their earnings go exponentially further compared to costlier parts of the country. Taking advantage of this dual benefit allows remote families and individuals to upgrade savings goals and lifestyles simultaneously.
Additional Cost-Saving Benefits to Relocating
Without question, taxes represent the single most influential factor in optimizing benefits from location independence as a remote worker. The difference between high-tax states and low-tax states can mean keeping or losing an additional five figures every year. Minimizing tax exposure through strategic location planning gives remote workers the ultimate work-life balance breakthrough by maximizing earnings potential. In essence, picking tax-friendly states provides the blueprint for transforming location freedom into tangible financial freedom and wealth-building.
Additional benefits that come from moving to a low-tax area can include:
More Money for Travel: A lower tax rate means that you have more income to use on travel and vacations throughout the year.
Reduced Spending on Eating Out: Some cities include additional taxes on food and beverages from restaurants and bars so be sure to include that in your tax considerations.
Less Financial Stress: Financial difficulties are a leading cause of stress. Lower taxes can help balance your budget while improving your well-being.
The key to choosing your new home lies in fully understanding your financial needs, especially your spending habits and matching that with a state's tax system. Remember, tax rates are complex and multifaceted so don't just look at property or income tax rates and take into consideration all of the taxes that will impact your cost of living. By doing some careful research, you’ll be able to select a tax-friendly state that will increase your bank account while aligning with your lifestyle.
About MakeMyMove
Remote work has freed millions of Americans to live where they want, and many are making the move to places that better match their lifestyle. In turn, cities and towns across the country are offering incentives like cash, perks and programming to remote workers who move and work from their communities. At MakeMyMove, you can explore all the places, get personalized help to find the one that’s right for you, connect with locals, and access support to make your move a piece of cake.