High Tax States Experiencing Outflow Of Residents to Low Tax States

Domestic residents are moving away from high tax states in light of caps on state and local tax deductions.

Caps on state and local tax (SALT) deductions are causing residents to relocate from high tax states like New York and New Jersey to states with no individual income tax.

The Tax Cuts and Jobs Act introduced the $10,000 cap on SALT deductions and prompted the decision for residents to move away. Individuals able to move are those whose professions do not require being in a specific location.

“It took a few months for taxpayers to realize the dollar implications – until they actually filed their tax returns this year. It quantified the impact of the loss of the SALT deduction when people saw it in front of their eyes on their tax return,” said Alan Goldenberg, a principal at Friedman LLP.

Individuals are starting to relocate to states with no individual income tax, such as Florida, Texas and Nevada. Florida received more movers than any other state. Florida received the largest number of movers from New York, at 63,772 people. California had the largest outflow of domestic residents.

Small businesses have also considered relocation. Such a move would be more difficult for larger companies with more employees.

As the deduction cap stays in place. High tax states are expected to experience more domestic resident outflows.

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