Where The Rich Move to Avoid Taxes

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2:53That's the power of us. Equal housing lender. Member FDIC. Trademark 2025 U.S. Bank. I'm Nicole Lappin, the only financial expert you don't need a dictionary to understand. It's time for some money rehab.

3:14So one of my biggest pet peeves is when so-called financial experts encourage people to sweat the small stuff and tell you to go cut out your morning latte because those little expenses add up. I say in the finance world, you should actually sweat the big stuff. I mean, why skip the$5 latte when instead you could lower the APR on your credit card and potentially save thousands of dollars? Sure,$5 lattes do add up, but not like the thousands of dollars of savings do. In relationships and in life, it's the small stuff that matters most. It's all about the little things. But in finances, it's all about the big things.

3:51And of all the big things you could sweat, one of the biggest biggies is taxes. Lowering your tax burden can change your life. I know that sounds cringy to say out loud, but the tax code where you live seriously affects how much money you hold onto throughout the year. In fact, many savvy business people uproot their lives and move to a more tax-friendly state. Jeff Bezos, for example, just recently relocated from Washington state to Florida, this move is expected to save him$430 million in taxes. Even if you're not a millionaire, setting up roots in a more tax-friendly state can save you a whole lot of money, so I am not kidding when I say it could change your life.

4:31And you still might think that moving for taxes sounds a little crazy. Kind of like 90-day fiancé moved to another country to marry someone you've never actually met kind of energy. But it really does happen. In fact, a recent study found that pandemic accelerated moves from higher tax states to lower tax states. So either there are more tax nerds out there than you think, or this is a real money move that you should consider. Let's take a look at which are the best states to call home. We financial experts don't always agree, but for most of us, Nevada, Wyoming, and Florida pretty consistently get top placement on our good lists.

5:06For starters, Nevada, Wyoming, and Florida do not have state income tax.

5:13You not tax income those states are alaska florida nevada new hampshire south dakota tennessee texas washington and wyoming and so if you're living in one of those states less money is coming out of your paycheck than fellow americans in the other 41. plus come tax season you only have to file one tax return unlike the rest of us who have to file a state and a federal tax return less paperwork equals less stress but here is a very important caveat if you're living in a state without income tax you're not guaranteed to be living large you're not even guaranteed to save very much on taxes that's because states without income taxes may compensate with other tax streams for example while texas doesn't have state income tax texans spend 1.8 percent of their income on property taxes which is higher than the average but nevada wyoming and florida are different and i'm gonna tell you why but first i'll give you an overview and then tell you what exactly your financial life would look like if you were in one of those states.

6:15Let's start with Wyoming. So unlike the Texas example I mentioned, Wyoming has no income tax and low sales tax and low property taxes. The state sales tax is 4%, which makes it the eighth lowest in the country. It also has the 10th lowest property tax rate. More on the importance of that in just a second. But now, let's travel over to the Sunshine State. And my apologies to Florida, but I would say that this is the ugly duckling of the top three picks. Florida pretty much only avoids the naughty list because it doesn't raise other taxes to compensate for a lack of income tax. The sales tax rate is around 6%, which is pretty average in the US.

6:56Property taxes in Florida aren't anything special either, but something is better than nothing. Or I guess when it comes to taxes, nothing is better than something, but a low something is better than a high something. Even though Florida doesn't get an A-plus on their tax codes, Florida is perhaps the biggest magnet for celebrities and athletes looking to lower their tax burden. Jeff Bezos, as I mentioned, just made this move along with billionaire Carl Icahn, football legend Tom Brady, billionaire hedge fund manager David Tepper, and on and on. These celebrities and public figures continue to choose Florida, even though there are states with better tax advantages.

7:33Alaska, for example, is widely considered to be the most tax-advantaged state. But let's be honest here, can you imagine Jeff Bezos moving to Alaska like after the finale of True Detective Night Country? It is hard to compete with the Sunshine State for sure, especially if you're a state that only gets three hours of sunlight during parts of the year. So even though there are other states with better tax advantages than Florida, I'm going to include it in the top three because it's a really common move for the ultra-rich and because it becomes a really interesting test case for the importance of income tax.

8:07I'll explain that in just a bit, but for now, let's head west to Nevada. Similar-ish to Florida, the sales tax isn't going to knock your socks off. It's just under 7%. But Nevada has the fourth lowest property tax rate in the country, which is a big deal. I know that so far this has been pretty abstract, so let's take a look at what it would be like to actually live in these states and let's compare in contrast with my home state of California, because here on Money Rehab, we face our finances head on. Let's imagine you own a$400 ,000 home and you're making$70K a year. What are our state rankings when we're looking at property taxes?

8:45Nevada is the champion where you'd only owe$2 ,200 in property taxes. Wyoming is a close second. There you'd owe a little over$2 ,400 in property taxes. In California, you'd be paying three grand. And in last place, Florida, where you'd be paying just about$3 ,300. So far, we're not seeing that much tax love, right? Nevada is the winner. Florida is the loser. And my home state of California, not looking so bad. But wait for it. Now we're going to add that layer of income tax. At$70K a year, you're going to owe around$8K in federal taxes. So across all of our state examples, we're going to bump our take-home pay down to 62 grand.

9:26Then the state taxes. In California, state taxes on 70K could be around 3 grand. So the take-home pay of$62 ,000 gets cut down to$59 ,000. But in Wyoming, Nevada, and Florida, nothing, nada, zippo, zilch. No more income tax. You're just staying there at 62K. So now let's look at the take-home pay after income taxes and property taxes. And that gives us the final rankings of first place, Nevada, where your take-home pay would be$59 ,800. Just barely behind Nevada, second place, Wyoming, where your take-home pay would be$59 ,560. Florida, which last time we checked was in last place, gets bumped up to third place with a take-home pay of about$58 ,700.

10:13bucks. And yep, in very last place, my home state of California, where I would get a take-home pay of$56 ,000. Almost 4 ,000 bucks less than what I would have gotten if I lived in Wyoming. Let's circle back to that moment I said that Florida was a good case study for the importance of income tax. Remember when I said that Florida didn't have a lot of tax perks beyond just nixing state income tax? And when we did the math for property tax, California actually had better rates than Florida? Well, even though both of those things are true, the absence of state income tax is so significant that it ultimately outweighs the benefit of lower property tax in California and makes Florida the more tax-savvy place to live.

10:57So yeah, I do love living in California, and it makes all the sense in the world for my career because there are more television studios in Los Angeles than there are in Nevada. But there is a parallel universe where Mama Money Rehab is living large in Las Vegas and she's keeping four grand more in that scenario than Mama Money Rehab is in this universe. For today's tip, you can take straight to the bank. If you're at a crossroads, as we so often are in life, and you're choosing between two states, choose the one that gets more tax love. I promise it's gonna pay off big time.

11:35Money Rehab is a production of Money News Network. I'm your host, Nicole Lappin. Money Rehab's executive producer is Morgan Lavoie. Our researcher is Emily Holmes. Do you need some money rehab? And let's be honest, we all do. So email us your money questions, moneyrehab at moneynewsnetwork.com to potentially have your questions answered on the show or even have a one-on-one intervention with me. And follow us on Instagram at moneynews and TikTok at moneynewsnetwork for exclusive video content. And lastly, thank you. No, seriously, thank you. Thank you for listening and for investing in yourself, which is the most important investment you can make.