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Posted by Pat Raskob

Things You Should Know Before Moving to a Higher Tax State

Things You Should Know Before Moving to a Higher Tax State

Considering moving to a new state? Congratulations. But have you compared the taxation between your old and new states? If it is on a higher level, you will probably have some questions. How are the schools? Is healthcare good over there? 

For most people, these are the general questions that will be asked. The cost of living could probably be high. As such, here are some financial tips that could help you make your move smooth.


Your State of affairs

As much as possible, you should consider getting your affairs in order when moving between new states. In your condition, since the new state has a higher tax rate, your estate tax will be increased too. You must update your will to reflect the changes too. An amendment to reflect the state laws is essential. 

As a matter of fact, you may need to create a trust specifically for legal and tax issues soon as you're settled. You should also consider getting them to put in a trust or set them up under a limited liability company if you own properties. It will help you save on the cost of probate.


Investment Strategies

Certain investments that may be tax-free in your former state could be subject to the tax laws in the new one. Municipal bonds, for example, are a good example. If the bonds in your portfolio were free from taxes, it could be different in the new state. The strategy used in the former state when investing may need readjustment. 

You should consult with an experienced CPA such as PAT RASKOB in the new state to better understand the tax laws for investment. Don't get it wrong; although taxes should not be the sole reason when choosing an investment, it is necessary to watch out for state tax laws.


Savings for college

Another crucial tip is the 529 savings plan for college in the new state. If you and your partner are working class, specific plans are open to choose from. As you're considering the plans, compare the benefits between each to see which favors you better. 

Does the contribution to the 529 savings fall under an income tax deduction in the state laws? Are there other tax-free benefits when saving for college? You should also compare out-of-state with in-state schooling if you've got kids in high school. 

Education savings are enough to help you get tax-free contributions while saving to give your kids a bright future. 


Cost of living

As with all relocations to a higher tax state, the issue of standard of living is an important matter you should not overlook. The cost of the house, tuition, and recreation are part of the factors you should consider. 

Do you want your kids to be enrolled in private or public schools? Tuition will depend on which part of the state you reside in if the public schools are up to standard. 

Your house is another factor. If you are looking to buy a house outright or through a mortgage, it will depend on the state tax laws. This issue is also dependent on the town where you will reside. 

As much as possible, you should be prudent since these are expenses and subject to tax deductions. It will help you to stay on track for your future investment plans. 


Conclusion

When moving to a new state with high tax deductions, you should look out for many considerations. You must look up the standard of living to help you plan ahead to keep your finances in order when relocating.


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Pat Raskob
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