On this episode of Adam Talks, tax attorney and IRA Financial’s founder, Adam Bergman, Esq., explains why you don’t have to leave the country to take advantage of tax-friendly situations; you can simply cross state lines!
You Don’t Need to Move to Monaco to Save on Taxes
On this episode of Adam Talks, Adam Bergman, a tax attorney and founder of IRA Financial, discusses how Americans can save on taxes by moving to tax-friendly states instead of relocating to other countries, such as Monaco or Switzerland. He highlights the significant state tax differences and the migration trends in the U.S., showing that states like Florida, Texas, and South Dakota attract many people due to their lower or non-existent state taxes.
Bergman presents data on the top states people are moving from and to, emphasizing the role of taxes and weather in these decisions. He notes that states like California, New York, and Illinois have high negative net migration due to their hefty tax rates, while Florida and Texas see large net positive migration.
He delves into specific state tax rates, comparing high-tax states like California, which has a top tax rate of 13.38%, to low-tax states like Florida, which has no state income tax. Bergman explains how these tax rates can significantly affect individuals, especially those with high incomes or substantial capital gains.
The podcast also addresses the practicalities of changing residency to benefit from lower state taxes. Bergman advises on the importance of demonstrating a genuine move, including spending at least 183 days in the new state and establishing a closer connection there, such as buying a home, joining local organizations, and canceling memberships in the former state.
He shares a personal anecdote about a high-earning hedge fund partner who had to prove his residency change meticulously, highlighting the detailed scrutiny states like California and New York apply to ensure tax compliance. Bergman points out modern tools like apps that help track days spent in different states, making it easier to document residency changes.
In conclusion, Bergman reiterates that while moving to another country might save more on taxes, relocating to a different state within the U.S. can still offer significant tax savings without the complexity of renouncing U.S. citizenship. He encourages listeners to consider these easier, albeit less glamorous, options to reduce their tax burdens while still enjoying the benefits of living in America.
