While there are numerous benefits to moving to a no income tax state, there are also dozens of considerations. Today, we’ll discuss having no capital gain taxes when relocating to an income tax-free state, along with corresponding considerations.

A typical counterargument to states that hold no-income taxes: “well, they have a high sales tax.” However, what is often overlooked is the massive tax break on capital gains. This is especially opportunistic for investors who own company stock or taxable stock portfolios. For example, take Portland. If one were to effectively domicile less than a mile across the river in the neighboring town of Vancouver, they could save nearly 10% on their taxable gain. Of course, that’s assuming they don’t potentially fall into a new tax bracket that is being pushed through legislation…and that they domiciled effectively in the case of an audit.

Still, perhaps the bigger question here is when, and how, should one realize a capital gain. Many will chase tax savings blindly, ditching the fundamentals of financial planning. For example, many individuals with concentrated equity portfolios struggle with unwinding their increasingly singular position: “Well, I work for the company, so I understand it.” “Well, it was at $70 a share last month, so I will wait until it gets back to that.” We all seem to view ourselves as the exception, but we all struggle with this. While you may save money on taxes by waiting to sell your position or stock until you move to a no-income-tax state, this falls under the false pretense that the stock will increase in the waiting period. Since this is highly subjective to individual circumstances, when we are faced with this problem of “how and when do I unwind a capital gain,” we take similar measures as mentioned before: run out various scenarios, and consider the decision in accordance with the entirety of one’s unique plan. That means balancing tax plays with risk management. Often, even though it’s initially viewed by the consumer as “should I do this or that,” the far more appropriate answer is “what combination of strategies and risk management makes the most sense.”

Moving is a large decision: it’s personal, it’s financial, and it’s undeniably complex. Understand that you are not alone if you are unsure as to how to go about this, and in this wealth-building journey, many people would like to have a guide…so schedule a time to chat at the link below. 

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These videos are limited to the dissemination of general information and are not intended to be legal or investment advice. Nothing herein should be relied upon as such. The views expressed are for informational purposes only and do not take into account any individual personal, financial, or tax considerations. There is no guarantee that any claims made will come to pass.   
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