Implications of State Taxes in Relocations

With an increase in remote work, business owners and their employees are taking the opportunity to relocate across state lines. But whether for work or retirement, what are the possible tax implications of a move, particularly from a high-tax state to a low-tax state? With more high-tax states auditing these moves to recover lost tax revenue, it’s important to understand how a relocation could impact you.

Check out this video for more details on the factors reviewed in these state tax audits, some great resources for you to analyze a move you might be considering, and an app that seems to be the go-to for most tax attorneys.

Here are some sites that outline the tax structure in each state and the recent changes in 2021 that you might not be aware of.

Kiplinger’s State-by-State Guide to Taxes on Retirees provides state tax rates and rules for income, sales, property, estate, and other taxes that impact retirees. One feature you’ll want to check is the “View State Compare List,” which lets you compare tax information on up to 5 states, including sales tax rates, property tax rates, and estate or inherence taxes.

The Tax Foundation’s guide to State Tax Changes Effective January 1, 2021 provides detailed information on the twenty-six states and the District of Columbia that had notable tax changes take effect on January 1, 2021.

So, what are tax auditors looking for besides the basics? Business interests? A suspicious move date? How about the amount of time you spend in each state, and how you (and they) prove it? Tax attorneys suggest an app that tracks where you are – the Monaeo Travel Tracking App. This app keeps track of the number of days you spend in different tax jurisdictions. It validates taxpayers’ locations, computes days and generates alerts, and documents tax years.

I hope this gives you some guidance as to the kind of tactics that high-tax states might use to audit a move to a lower-tax state. And remember, it’s important to talk to your CPA or tax attorney to find out the particulars of your situation.

**Barry Glassman is not a CPA or tax attorney and is only providing an informational and educational review of tactics states are employing in their audit processes, as well as resources for you to conduct further research. You should consult with a tax professional to discuss the details of your situation.