Learn how your state of residence, where your income is earned, and where you hold property can impact your tax exposure and shape your long-term wealth strategy. 

Navigating State Tax Laws to Help Grow Savings

State tax laws can have a major impact on your overall financial strategy—especially for high-net-worth individuals. While federal taxes get most of the attention, variations in state income tax, capital gains, property tax, and estate rules can create meaningful differences in your long-term outcomes.

Whether you’re managing income across multiple states, considering a change in residency, or evaluating how your property holdings align with your goals, strategic tax planning at the state level deserves close attention.

At EP Wealth, our tax planning services help clients:

• Evaluate the tax implications of residency and relocation
• Analyze property ownership and state-specific tax exposure
• Assess income sourcing and business activity across jurisdictions
• Integrate state tax considerations into their broader financial plan
• Plan for multi-generational wealth transfer with awareness of estate tax thresholds at the state level

These strategies are especially valuable during major life or financial transitions – such as selling a business, retiring to a new state, owning property across state lines, or receiving equity compensation – when the impact of state tax laws can be both immediate and significant.

State-Level Tax Factors That Can Shape Financial Decisions

State-level tax laws differ widely and may impact everything from your investment income to estate transfers. For high-net-worth individuals and families, understanding these differences is key to more effective tax and financial planning.

Income Taxes

Some states impose no income tax, while others have progressive rates that rise steeply with earnings. High earners may explore how income recognition strategies could align with state residency decisions.

Sales Tax Considerations

States differ in how they tax goods, services, and even digital products. For those making substantial purchases or running consumer-facing businesses, sales tax policies may influence decisions about where to buy, sell or operate.

Property Taxes

Local property tax rates and assessment rules vary widely – not just by state, but even by county. Understanding how location impacts long-term property tax obligations can guide real estate purchases, ownership structures, and succession planning.

Estate and Inheritance Taxes

While the federal estate tax receives much attention, several states impose their own estate or inheritance taxes, often with lower exemption amounts. This can complicate wealth transfer planning – especially if beneficiaries live in different states or own property in taxable jurisdictions.

Strategic tax planning at the state level isn’t just about compliance – it's about making informed decisions that align with long-term goals. At EP Wealth, we help clients evaluate the impact of state-specific tax rules on their broader financial strategy.

Residency and Domicile: More Than Just a Mailing Address

If you're relocating or splitting time between multiple homes, your state of residency can significantly impact how your income is taxed. A key distinction to understand is between domicile and residency:

• Domicile is your true, permanent home – the place you intend to return to and remain.
• Residency is typically based on where you spend your time during the year.

Different states weigh these factors in varying ways when assessing tax liability, often looking to indicators of intent. Actions like registering to vote, updating your driver's license, or designating a primary physician in your new location can help support a claim of domicile.

Additionally, mid-year moves or owning homes in multiple states can create complex tax situations, including residency issues or nonresident income sourcing. Aligning your legal residence with your financial goals, particularly if you're considering moving to a state with a lower tax burden, requires strategic planning and detailed record-keeping.

At EP Wealth, we help clients proactively manage the tax implications of changing residency – helping ensure your lifestyle choices support your long-term financial goals.

Income Planning: Aligning Timing and Location

High-income individuals often have flexibility not just in how they earn, but in when and where they recognize income. At EP Wealth, our financial planners work with clients to understand the tax implications of income planning across jurisdictions – helping to optimize both timing and location, all within the framework of state and federal law.

• Timing of Income Recognition: If you're planning a move, deferring income into a tax-advantaged jurisdiction may be worth exploring.
• Source of Income Rules: States may still tax income earned within their borders, even if you're no longer a resident. This applies to wages, business income, or even remote work scenarios.
• Pass-Through Entities: Income from LLCs, S-Corps or partnerships can be treated differently across states. Planning around allocation and apportionment rules is key to managing exposure, especially for business owners.
• Retirement Income: States vary in how they treat pensions, IRAs, and Social Security. Where you live in retirement can directly impact your net retirement income.
• Investment Location Strategy: Where you hold investments matters. For example, tax-exempt municipal bonds may offer benefits depending on your state of residence. Asset location should be part of a broader tax strategy.

By factoring in these details, we develop tailored income planning strategies that reflect each client’s unique mix of income sources, residency status, and long-term financial goals.

Real Estate and Property Considerations

Where and how you own property can significantly influence your tax exposures – and those implications vary by state.

Real estate taxes differ based on location, assessment practices, and whether transfer taxes apply when a property is gifted or sold. Your ownership structure—whether held personally, through business entities or trusts—can also impact your overall tax and estate planning strategy.

Before purchasing property in a new state, speak with your EP Wealth advisor to evaluate potential property tax liabilities, transfer costs, and ownership structure options. For business owners, owning commercial property across multiple states can further complicate tax filings and trigger additional reporting requirements, making proactive planning essential.

Managing Multi-State Tax Complexities

Owning homes, earning income, or operating businesses in more than one state introduces added complexity and often overlooked tax obligations. Some key factors to consider include:

• Credits for taxes paid to other states: Some states offer credits to help avoid double taxation, but rules vary widely and don’t always eliminate overlap.
• Reciprocity agreements: Certain states have agreements allowing residents who work across borders to pay income tax only to their state of residence – simplifying Compliance and reducing filing burdens.
• Multiple filing requirements: Earning income in more than one state – whether from employment, short-term projects, rental properties, or pass-through entities – may trigger additional state tax filing. While most states don’t tax nonresidents on passive income like interest or dividends, income tied to real estate or business activity (even as a passive investor) is often taxable in the state where it’s sourced. Sourcing rules and business nexus: States may claim taxing rights over income earned from a business operating within their borders. Even remote or online businesses can create a nexus through employee presence, client locations or sales activity.

Stepping back to evaluate your overall tax situation across multiple jurisdictions can reveal planning opportunities and help minimize or possibly avoid costly overlaps or unintended exposure.

Making State Tax Planning Part of the Bigger Picture

State tax laws are far from uniform, and those differences can have a real impact on high-net-worth individuals and families. By evaluating where you live, how your income is structured, and where your assets are located, you can build a more strategic and tax-efficient financial plan.

EP Wealth is here to help guide those conversations and provide personalized support every step of the way. Contact an advisor near you to learn how we can help align state tax planning with your long-term goals.

DISCLOSURES

• EP Wealth Advisors, LLC. is registered as an investment advisor with the SEC and only transacts business in states where it is properly registered, or is excluded or exempted from registration requirements. SEC registration does not constitute an endorsement of the firm by the Commission nor does it indicate that the advisor has attained a particular level of skill or ability.
• Request an appointment with an EP Wealth Advisor when you have a minimum of $500,000 in investable assets – which includes qualified retirement plans (IRA, Roth IRA, 401(k), taxable brokerage, cash (savings / checking) and CDs. Investable assets do not include your home, vehicles, or collectibles.
• Hiring a qualified advisor and/or financial planner does not guarantee investment success, and does not ensure that a client or prospective client will experience a higher level of performance or results. No guaranty or warranty is made that any direct or implied results or projections being represented here will be met or sustained.
• There is no guarantee or warrantee that a client or prospective client that engages EP Wealth Advisors, LLC in Tax Planning services will experience investment success, or significant tax savings, and does not ensure that a client or prospective client will experience a higher level of performance or results. No guaranty or warranty is made that any direct or implied service, offering, report, or analysis represented here will be offered or delivered. The services offered to clients will vary and depend on several factors.
• There is no guarantee that all the services detailed herein will be offered to a client. The services EPWA offers clients is dependent on the requirements of each client. In many instances, clients or prospective clients may not have a need for all or some of the services detailed.
• Information presented is general in nature and should not be viewed as a comprehensive analysis of the topics discussed. It is intended to serve as a tool containing general information that should assist you in the development of subsequent discussions. Content does not involve the rendering of personalized investment advice nor is it intended to supplement professional individualized advice.    
• An estate plan is a helpful tool that can assist individuals in managing and arranging affairs in the event of death or incapacity. However, the scope and extent of the plan varies depending on the unique circumstances and desires of the individual client. It is for this reason, that the analysis encompassed herein is not intended to be comprehensive in nature nor should it be interpreted as legal advice. Please consult a legal professional to determine the extent, scope, and the drafting and creation of the appropriate estate documents. EP Wealth Advisors is not in the business of providing legal advice or preparing legal documents. Our review is limited to and in association with Financial Planning only.
• Please consult with a CPA, tax professional, and/or attorney regarding your specific situation before implementing any of the strategies referenced directly or indirectly herein.
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