Yahoo Finance Tax Savings 2024: A Move From California To Florida Can Save You $2,800 Per Year
Taxes play a big role in Americans’ moving decisions. According to the U.S. Census Bureau, 365,205 people moved to Florida between July 1, 2022, and July 1, 2023. Meanwhile, California lost 75,423 throughout 2023, per Yahoo! Finance. The reason? Americans can save hundreds or thousands of dollars per year by moving to states with a lower cost of living, especially no-income tax states like Florida, Yahoo! Finance reported.
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According to a report from Yahoo! Finance from earlier this year, a California household earning the median income of $91,905 would save nearly $2,843 a year by moving from California to a no-income-tax state.
But there’s more that goes into this calculation, and residents of every state have to pay taxes one way or another. Here’s a closer look at the differences between California and Florida.
Income Taxes
When it comes to state taxes, the biggest difference between California and Florida is income tax.
Floridians don’t pay a state income tax, although they still have to pay federal income tax. In California, the graduated individual income tax rates range from 1% to 13.3%, according to the Tax Foundation. This means that lower-income taxpayers pay less in taxes than higher-income individuals. The 13.3% tax rate is applied to incomes over $1 million per year when filed jointly by a married couple.
The Florida Agents found that Floridians keep more money at nearly every income level than Californians. The more you make, the more noticeable the difference.
For example, The Florida Agents calculated that a household income of $150,000 per year in California would result in over $7,000 in state income taxes. In contrast, the same household income in Florida would see $0 in state income taxes. A household earning $250,000 annually in California carries a state income tax burden of over $16,300, while a Florida household earning the same amount would pay $0.
Learn More: Why Many Regret Moving to Florida Post-Pandemic
Sales Taxes
Another difference is state sales tax rates. A sales tax is a tax imposed by the government on the sale of goods and services.
California has a 7.25% state sales tax rate and an average combined state and local sales tax rate of 8.85%. In Florida, the state sales tax rate is 6%, while the average combined state and local sales tax rate is 7%.
Property Taxes
Floridians do pay more in property taxes, though. Homeowners in Florida pay a 0.71% effective property tax rate on owner-occupied housing value, while homeowners in California pay 0.68%.
However, there are additional factors to consider about property taxes, noted Yahoo! Finance. One is property values, which vary widely, and the other is how states assess property. California limits annual assessment increases to 2% until a property is sold, while Florida taxes properties at fair market value, according to the state’s Department of Revenue.
This means that Florida homeowners could pay more taxes if property values rise. If prices stay flat, residents won’t see much of a difference.
“If you look at real estate prices, they’re going up,” Edvin Givargis — a state and local tax managing director at Andersen, a global tax service firm — explained to Yahoo! Finance. “So you’ve saved income taxes, but homes adjust to fair market value.”
Yahoo! Finance also pointed out that California’s property tax treatment is bad for “growth households” and benefits longtime homeowners the most. Younger families and first-time buyers pay higher property and income taxes than other California homeowners.
“[California’s system] distorts property tax burdens substantially by leaving some people with extremely low property bills, but sticking others with extremely high ones,” Jared Walczak, vice president of state projects at the Tax Foundation, told Yahoo! Finance.
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This article originally appeared on GOBankingRates.com: Tax Savings 2024: A Move From California To Florida Can Save You $2,800 Per Year
