Where The Rich Move to Avoid Taxes

Speaker 1 Here's one piece of advice that I've given for years: Build an emergency fund. Aim to stash away enough to cover at least three months of expenses in case your income suddenly drops.

Speaker 1 Sounds simple, right? But let's be honest, it's not. Saving even one month's worth of living costs can feel impossible.

Speaker 1 Just when you're making progress, that check engine light blinks on and derails your plans. Life already throws enough curveballs.
You don't need your bank adding to the chaos.

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Speaker 1 Work on your financial goals through QIIME today. Open an account in just two minutes at chime.com/slash MNN.
That's chime.com/slash MNN. Chime feels like progress.

Speaker 2 Chime is a financial technology company, not a bank. Banking services and debit card provided by the Bank Corporation Bank NA or Stripe Bank NA.
Members FDIC.

Speaker 2 Spot me eligibility requirements and overdraft limits apply. Timing depends on submission of payment file.
Fees apply at Out of Network ATMs, bank ranking, and number of ATMs, according to U.S.

Speaker 2 News and World Report 2023. Chime, checking account required.

Speaker 3 I live in LA now, but lately I have been craving the seasons. Snow, hot cocoa, the whole thing.

Speaker 3 I don't even ski, but I have been daydreaming about working remotely from somewhere really cozy on the East Coast, like a cute little ski town for a little bit.

Speaker 3 And whenever I know I'm going to be gone for a while, I always remind myself that my home can actually be working for me while I'm away because I host my space on Airbnb.

Speaker 3 It is one of the easiest ways to earn passive income from something you already have, and that extra income feels particularly helpful this time of year as we approach the holidays.

Speaker 3 A lot of my friends say, that sounds amazing, but where do you find the time to manage guests and bookings? And that's when I tell them about Airbnb's co-host network.

Speaker 3 Through Airbnb, you can find a local co-host who can help you set up your listing, handle reservations, communicate with guests, provide on-site support, even help with design and styling.

Speaker 3 I like to give a personal touch when I'm hosting on Airbnb. So I make a list of my favorite restaurants in the area and I handwrite a note welcoming my guests to the property.

Speaker 3 My guests love it, but I also know that some of those little personal touches can take a lot of extra time. So this is the exact kind of thing that you would want your co-host to help you with.

Speaker 3 Whether you're traveling for work or chasing the snow or escaping it, or you've got a second place that just sits there empty more often than you'd like, your home doesn't have to just sit there.

Speaker 3 You can make extra money from it without taking on extra work. Find a co-host at airbnb.com slash host.

Speaker 1 Here's one piece of advice that I've given for years. Build an emergency fund.
Aim to stash away enough to cover at least three months of expenses in case your income suddenly drops.

Speaker 1 Sounds simple, right? But let's be honest, it's not. Saving even one month's worth of living costs can feel impossible.

Speaker 1 Just when you're making progress, that check engine light blinks on and derails your plans. Life already throws enough curveballs.
You don't need your bank adding to the chaos.

Speaker 1 That's why it's so important to choose one that makes savings easy and doesn't nibble away at your hard-earned money with ridiculous fees. QIIME understands that every dollar counts.

Speaker 1 That's why when you set up direct deposit through QIIME, you get access to fee-free features like free overdraft coverage, getting paid up to two days early with direct deposit, and more.

Speaker 1 With qualifying direct deposits, you're eligible for free overdraft up to $200 on debit card purchases and cash withdrawals. To date, CHIIME has spotted members over $30 billion.

Speaker 1 Work on your financial goals through QIIME today. Open an account in just two minutes at chime.com/slash MNN.
That's chime.com slash MNN. Chime feels like progress.

Speaker 2 Chime is a financial technology company, not a bank. Banking services and debit card provided by the Bancorp Bank NA or Stripe Bank NA.
Members, FDIC.

Speaker 2 Spot me eligibility requirements and overdraft limits apply. Timing depends on submission of payment file.

Speaker 2 Fees apply at out-of-network ATMs, bank ranking, and number of ATMs, according to US News and World Report 2023. Chime checking account required.

Speaker 1 I'm Nicole Lappin, the only financial expert you don't need a dictionary to understand. It's time for some money rehab.

Speaker 1 So 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.

Speaker 1 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?

Speaker 1 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.

Speaker 1 But in finances, it's all about the big things. And of all the big things you could sweat, one of the biggest biggies is taxes.
Lowering your tax burden can change your life.

Speaker 1 I know that sounds cringy to say out loud, but the tax code where you live seriously affects how much money you hold on to throughout the year.

Speaker 1 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.

Speaker 1 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.

Speaker 1 So I am not kidding when I say it could change your life.

Speaker 1 And 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.

Speaker 1 But it really does happen. In fact, a recent study found that the pandemic accelerated moves from higher-tax states to lower tax states.

Speaker 1 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.

Speaker 1 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.

Speaker 1 For starters, Nevada, Wyoming, and Florida do not have state income tax. You heard me correctly.
There are actually nine states that do not tax income.

Speaker 1 Those states are Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming.

Speaker 1 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.

Speaker 1 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.

Speaker 1 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.

Speaker 1 That's because states without income taxes may compensate with other tax streams.

Speaker 1 For example, while Texas doesn't have state income tax, Texans spend 1.8% of their income on property taxes, which is higher than the average. But Nevada, Wyoming, and Florida are different.

Speaker 1 And I'm going to 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. Let's start with Wyoming.

Speaker 1 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.

Speaker 1 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.

Speaker 1 And my apologies to Florida, but I would say that this is the ugly duckling of the top three picks.

Speaker 1 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 U.S.

Speaker 1 Property taxes in Florida aren't anything special either, but something is better than nothing.

Speaker 1 Or I guess when it comes to taxes, nothing is better than something, but a low something is better than a high something.

Speaker 1 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.

Speaker 1 Jeff Bezos, as I mentioned, just made this move along with billionaire Carl Icon, football legend Tom Brady, billionaire hedge fund manager David Tepper, and on and on.

Speaker 1 These celebrities and public figures continue to choose Florida, even though there are states with better tax advantages. Alaska, for example, is widely considered to be the most tax advantaged state.

Speaker 1 But let's be honest here, can you imagine Jeff Bezos moving to Alaska? Like after the finale of True Detective Night Country?

Speaker 1 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.

Speaker 1 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.

Speaker 1 I'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.

Speaker 1 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.

Speaker 1 So let's take a look at what it would be like to actually live in these states.

Speaker 1 And let's compare and 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 $70,000 a year.

Speaker 1 What are our state rankings when we're looking at property taxes? Nevada is the champion where you'd only owe $2,200 in property taxes. Wyoming is a close second.

Speaker 1 There you'd owe a little over $2,400 in property taxes. In California, you'd be paying $3,000.
And in last place, Florida, where you'd be paying just about $3,300.

Speaker 1 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.

Speaker 1 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.

Speaker 1 So across all of our state examples, we're going to bump our take-home pay down to 62 grand. Then the state taxes.
In California, state taxes on 70K could be around three grand.

Speaker 1 So the take-home pay of $62,000 gets cut down to $59,000. But in Wyoming, Nevada, and Florida, nothing, not a Zippo zilch.
No more income tax. You're just staying there at $62K.

Speaker 1 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.

Speaker 1 Just barely behind Nevada, second place, Wyoming, where your take-home pay would be $59,560.

Speaker 1 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.

Speaker 1 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.

Speaker 1 Let's circle back to that moment I said that Florida was a good case study for the importance of income tax.

Speaker 1 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?

Speaker 1 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.

Speaker 1 So, 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.

Speaker 1 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.

Speaker 1 Aside, 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.

Speaker 1 I promise it's going to pay off big time.

Speaker 1 Money Rehab is a production of Money News Network. I'm your host, Nicole Lapin.
Money Rehab's executive producer is Morgan Lavoie. Our researcher is Emily Holmes.
Do you need some Money Rehab?

Speaker 1 And let's be honest, we all do.

Speaker 1 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.

Speaker 1 And follow us on Instagram at Money News and TikTok at Money News Network for exclusive video content. And lastly, thank you.
No, seriously, thank you.

Speaker 1 Thank you for listening and for investing in yourself, which is the most important investment you can make.