Florida is one of the few states in America that does NOT collect a personal income tax. If you are thinking about moving to Florida, you could save a significant amount of money each year.
In fact, we calculated that an average family could save over $2,000 per year just on state income taxes if they moved to Florida in 2022.
Let’s break down the numbers and see how much you could save if you became a resident of Florida.
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Background – What is State Income Tax?
First, let’s find out which tax we are talking about. There are usually 3 primary income taxes that you need to pay each year, one at the federal level, one through your state, and one for your local government. Virtually everyone is liable to pay the federal income tax, but there are some states and local governments that have eliminated their income tax liabilities.
In the U.S., these 9 states have no state-level income taxes:
- New Hampshire
- South Dakota
Florida is the 2nd biggest state in the U.S. that does not levy an income tax. Only Texas is bigger.
Breakdown – How Much Can You Save on Taxes Per Year in Florida?
To calculate your potential savings, we used this income tax calculator provided by SmartAsset. You can go there to put in your exact annual income and tax situation to see how big the difference would be for you and your family.
For this example, we used a household income of $75,000, which is close to the annual median household income in the U.S. for 2020.
We also used a status of “Married, Filing Jointly” and applied 2 tax exemptions for the household. Here are the results of the annual state income tax for a family in the above mentioned situation:
Household Income: $75,000
Status: Married, Filing Jointly
Tax Exemptions: 2
|State||State Income Tax &|
Effective Tax %
As you can see, Florida offers a huge annual savings in income tax compared to the overwhelming majority of other states. On average, the difference came out to be over $2,200, which is 3% of the total income.
There are a handful of states that you could move from that would even net over $4,000 to $5,000 in savings. If you move from Oregon to Florida, you could potentially save $5,100 just on taxes. You would also get access to some of the best beaches in the world and probably a bit more sun.
It gets better if you have a higher income since a lot of these states have progressive tax codes that have higher marginal rates when you earn more money.
Let’s try an example. If you now make $200,000 per year in New York, you would need to pay almost $10,800 per year in state income taxes under the same circumstances as listed above. That is an effective rate of 5.4%, which is more than 1 percentage point higher than a salary at the $75,000 level.
What if you earn $500,000 in Oregon? That would cost you $44,931 in state income taxes in 2022, which is an effective rate of 8.99%.
Now, you can understand why some sports stars and celebrities choose Florida as their home. When LeBron James chose to take his talents to South Beach in 2010 and signed a free agent contract with the Miami Heat, his contract was 6 years for $109 million.
If he had stayed with the Cleveland Cavaliers in Ohio, he would have been liable for an average of almost $700,000 per year in state income taxes. In Florida, that money went straight into his pocket. Therefore, his 6 year contract in Florida saved him over $4 million in taxes alone.
Meanwhile, Tom Brady’s 2-year, $50 million contract with the Tampa Bay Buccaneers in 2020 will net him an extra $2.5 million in tax savings compared to if he signed the same contract with his old team, the New England Patriots, as the Massachusetts state income rate is a flat 5%.
Summary – Save More on Taxes in Florida
You don’t have to be LeBron James or Tom Brady to enjoy a nice tax savings if you move to Florida. It seems like a win-win situation compared to most other states – you get to move to a warm state with a reasonable cost of living, all while saving upwards of $5,000 per year on average just on taxes.
If you are getting serious about moving to Florida, then read our other articles on the best places to live around the state.