A growing number of Americans are reconsidering where they live — not just for lifestyle reasons, but for financial ones.
New IRS migration data reveal a clear pattern: billions of dollars in income are moving out of high-tax states into areas where taxes, and often overall living costs, are lower.
For higher-income households in particular, relocating can translate into five-figure annual savings.
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But taxes are only part of a broader shift shaped by housing costs, remote work, and changing lifestyle priorities. Here’s what the latest data shows and how to think about it if you’re considering a move.
The states people are leaving
High-tax states continue to see significant outflows of both residents and income, according to the most recent IRS Statistics of Income migration data.
- California: Lost $11.9 billion in adjusted gross income (AGI)
- New York: Lost $9.9 billion
- Illinois: Lost $6 billion
- Massachusetts: Lost $4 billion
- New Jersey: Lost $2.6 billion
Note: These figures are based on the most recent IRS data, reflecting tax returns filed in 2023 for the 2022 tax year. While multi-year analyses may show larger cumulative losses, the amounts listed reflect the latest single-year net migration of AGI.
Much of that lost income is tied to higher-earning households. In Massachusetts, for example, about 70% of outbound AGI came from households earning over $200,000, according to analysis from conservative-leaning think tank, the Pioneer Institute.
These departures matter for state budgets. When higher earners leave, they take a disproportionate share of tax revenue, creating fiscal pressure even if overall population changes are modest.
Yet not all analysts agree on the cause. Research from the nonprofit, nonpartisan Massachusetts Budget and Policy Center (MassBudget) suggests that affordability — not taxes alone — is the primary driver.
Their analysis notes that many people leaving actually earn below the Commonwealth’s top tax brackets.
Where Americans are moving
Income from those leaving high-tax states is showing up elsewhere, primarily in lower-tax, lower-cost regions. Top destinations include:
- Florida: Gained $20.6 billion in AGI
- Texas: Gained $5.5 billion
- South Carolina: Gained $4.1 billion
- North Carolina: Gained $3.9 billion
- Tennessee: Gained $2.8 billion
Several of these states have no state income tax, including Florida, Texas, and Tennessee. Others offer relatively low flat tax rates and more affordable housing markets.
For many households, the financial difference can be significant. A move from a high-tax, high-cost state to a lower-cost region can reduce both tax liability and housing expenses — sometimes by tens of thousands of dollars per year.
How taxes drive migration
For higher-income households, tax differences between states can be particularly significant.
A $250,000 household could save roughly $15,000 to $30,000 annually by moving from a high-tax state to one with no income tax. Meanwhile, those earning $500,000 or more might see savings exceed $40,000.
- No-income-tax states like Florida and Texas also exempt retirement income and capital gains from income tax, though exceptions apply.
- But Washington state, for instance, has no personal income tax for most residents but imposes a 7% capital gains tax on high earners and just approved a new 9.9% millionaires’ tax.
Still, taxes are only part of the picture.
Housing affordability, lifestyle preferences, and family considerations often play an equal role, or, in some cases, a greater role, in relocation decisions.
MassBudget notes that most people leaving high-tax states earn under $200,000 and that overall affordability is a stronger driver than surtaxes. The organization wrote the following in its recent analysis of IRS migration data:
“The data show that the households leaving the state are least likely to be subject to the surtax. That tells us something important: the lack of affordability of housing, education, transportation, childcare, and utilities, for example, are the real challenges we need to address.”
Nationally, remote work seems to add to those financial incentives for some.
Those households that can move to lower-cost areas without changing jobs sometimes turn relocation into a viable strategy for saving money and improving their lifestyle at the same time.
A lasting trend?
The movement of households from high-tax, high-cost states to lower-tax regions appears to be a lasting trend, not a short-term spike.
- Remote work has become a permanent part of the U.S. labor market: 13.8% of workers primarily work from home, according to the U.S. Census Bureau.
- When hybrid arrangements are included, roughly one in five workers teleworks at least part of the time, giving families more flexibility to relocate.
As the Census Bureau has noted:
“The share of the workforce working from home… remains more than double what it was before COVID-19.”
At the same time, high housing costs and overall cost-of-living pressures are encouraging families to consider more affordable regions. Lifestyle factors like proximity to family or a milder climate also influence decisions.
Taken together, these patterns suggest that migration driven by financial, professional, and personal considerations is likely to continue through 2026 and beyond.
Practical considerations to consider before relocating
Even though relocating for financial or lifestyle reasons can make sense, the decision is more complex than simply comparing tax rates. Here are some factors to consider before you pack your bags.
1. State Tax Landscape
- No-income-tax states (Florida, Texas, Nevada, Tennessee, Wyoming) eliminate state tax on wages, retirement income, Social Security, and capital gains.
- Offsetting taxes: Some states rely more heavily on sales taxes or property taxes. For example, Texas has a maximum sales tax of 8.25%, and Florida’s is 7.5%.
2. Housing Costs
- Lower purchase prices don’t always translate to lower total costs. Factor in property taxes, insurance, and maintenance.
- Examples: Texas homes may be more affordable than California homes, but homeowners’ insurance has risen sharply. Florida’s no-income-tax benefit can be partially offset by rising hurricane insurance premiums.
3. Additional Expenses
- Vehicle registration, utilities, auto insurance, and local fees vary considerably.
- For instance, vehicle registration in Texas can average about $50 a year, compared with $300+ in California.
4. Tax Residency Rules
- High-tax states like New York, California, and New Jersey use domicile and physical presence tests to determine residency tax liability.
- Maintaining a home, voter registration, or a driver’s license in a former state can trigger full-year tax responsibility.
- “Snowbird” audits increasingly target part-year residents, so severing ties is important to avoid multi-year disputes.
Bottom Line
Relocating generally requires a holistic view of taxes, housing, lifestyle, and legal obligations. But comparing headline tax rates is only the start.
Understanding the total cost of living, work flexibility, and residency rules can help you make sure your move delivers real financial benefits.
