Moving to a new state is a major milestone for individuals and families, often bringing both emotional and financial considerations. One factor frequently overlooked during the moving process is the potential state tax impact. Taxes vary widely from state to state, and establishing residency for tax purposes may be more complicated than you expect.  

Our state and local tax pros offer this guidance to help you understand how changing states could affect your overall tax situation. 

Evaluate all your taxes  

It may seem like a tax-smart idea to simply move to a state with no personal income tax, but it’s important to understand all taxes that can potentially apply to a state resident. In addition to income taxes, these may include property taxes, sales taxes and estate taxes. 

If the state you’re considering has an income tax, look at the types of income it taxes. For example, some states offer tax breaks for pension payments, retirement plan distributions and Social Security payments. 

Some states with low or no income tax have higher-than-average property tax rates or sales tax rates that could offset income tax savings. Even if you’re moving from one no-income-tax state to another, it’s important to look at how your potential property and sales tax expenses in each state compare.  

When it comes to estate taxes, the federal estate tax doesn’t apply to many people these days. For 2026, the federal gift and estate tax exemption is $15 million per individual, or $30 million for a married couple (with proper planning). However, some states have an estate tax that provides a much lower exemption or bring an inheritance tax in addition to (or in lieu of) an estate tax. 

Establishing domicile  

If you make a permanent move to a new state and want to ensure you’re not taxed in the state you came from, be careful to establish legal domicile in the new location and terminate it in your old one. The definition of legal domicile varies from state to state. In general, domicile is your fixed and permanent home and the place where you plan to return, even after periods of residing elsewhere. 

The more time that passes after you change states and the more steps you take to establish domicile in the new state, the harder it will be for your old state to claim that you’re still domiciled there for tax purposes. Five ways to help establish domicile in a new state include: 

• Changing your mailing address at the post office. 
• Changing your address on insurance policies, will or living trust documents, and other important documents. 
• Buying or leasing a home in the new state and selling your home in the old state (or rent it out at the market rate to an unrelated party). 
• Opening and using bank accounts in the new state and closing accounts in the old one. 
• Registering to vote, getting a driver’s license and registering your vehicle in the new state. 

If you’re required to file an income tax return in the new state, file a resident return. And file a nonresident return or no return (whichever is appropriate) in the old state. We can help you make these decisions and file these returns. 

Plan Ahead  

Moving to another state can affect your taxes in ways that aren’t always obvious. Before you relocate, work with a state and local tax pro to review the potential income, property, sales and estate tax implications. Our team can help you minimize potential negative tax consequences and make the most of any tax advantages offered by the new state.