Offering Exclusive High Net Worth Portfolio, Estate and Tax Protection Strategies developed over 30+ years

Offering Exclusive High Net Worth Portfolio, Estate and Tax Protection Strategies developed over 30+ years

YES, I’d like advice from an un-biased advisor Schedule A Free Consultation Exclusively Offered To Investors with $5 million to $500 Million Of Liquid Investable Assets
YES, I’d like advice from an un-biased advisor Schedule A Free Consultation Exclusively Offered To Investors with $5 million to $500 Million Of Liquid Investable Assets

Taxes are a major concern for high net worth as well as ultra-high net worth individuals. Unfortunately, they often realize this too late, usually after they end up paying tens of millions of dollars in taxes every year. However, an even bigger concern and a huge mistake is to think that they can do nothing about it.

While you can’t avoid taxes entirely, there are certain tax management strategies you can employ to reduce your tax bill and retain the maximum amount of your wealth. If you have more than $10 million in liquid assets, you can learn about some of these strategies from our eye-opening guide on choosing financial advisors. One strategy that often goes ignored is moving to states with no income tax to shrink your tax bill and avail other benefits as well.

choosing the best financial advisor

Strategies For Families Worth $5 Million To $500 Million
The Ultimate Guide To Choosing the Best Financial Advisor

The insights you’ll discover from our published guide will help you integrate a variety of wealth management tools with financial planning, providing guidance for your future security alongside complex financial strategies, so your human and financial capital will both flourish.

Clients frequently share with us how the knowledge gained from this guide helped provide them tremendous clarity, shattering industry-pitched ideologies, while offering insight and direction in making such important financial decisions.

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Pillar Wealth Management is one of the top wealth management firms for high net worth or ultra-high net worth individuals and families. We hold extensive experience in the industry, spanning more than three decades. Our team of wealth managers and advisors are wholly dedicated to serving our clients’ needs and helping them fulfill all their financial goals and targets.

We offer a range of financial services, from investment management, risk management to retirement planning to even tax management and optimization. Schedule a free consultation with our managers to talk about your wealth and tax concerns.

Today, we’ll be discussing whether states with no income tax are actually beneficial, which states don’t have federal income and whether you can live tax-free. Let’s get started.

What States Have No Federal Income Tax?

Paying taxes is a part of every American’s life. However, for some, such as those affluent individuals with $5 million to $500 million in liquid assets, taxes can have a much bigger impact on their total wealth as compared to others. This not only leads to them losing significant amounts of their wealth every year but can also completely throw off their financial plans and investment strategies.

Learn how to protect as well as grow your wealth by ordering a free copy of our book, The Art of Protecting Ultra-High Net Worth Portfolios and Estates – Strategies for Families Worth $25 million to $500 million.

That’s why at Pillar Wealth Management, our managers devise comprehensive financial plans and risk mitigation strategies to make sure you keep as much of your income as possible while working towards all your goals and targets. One way we do this is by advising our clients to move to states with no income tax. These include the following nine states:

– Alaska

– Nevada

– South Dakota

– Texas

– Wyoming

– Florida

– New Hampshire

– Tennessee

– Washington

Tennessee and New Hampshire are often excluded from the list of states with no income tax because even though these states charge no income tax, they do impose taxes on interests and dividends. However, these states do plan to phase out and change some of their tax policies in 2021 for Tennessee and in 2025 for New Hampshire. The rest of the seven states charge no federal income tax whatsoever.

But what does that really mean?

Normally, high net worth individuals have to pay significantly much more tax at higher rates because of their high net worth and large incomes. This causes a sizeable dent in their wealth every year. However, by moving to states with no income tax, such individuals and families are exempted from paying those exorbitant tax bills on their incomes, and, therefore, they are able to save much more. Contact our experienced wealth managers to learn how this move can affect your wealth.

Advantages of Moving to States with No Income Tax

These no income tax states offer more than just good weather and job opportunities. They offer numerous benefits for high net worth individuals, such as those mentioned below.

States with no income tax

Retain More of Your Income

One obvious advantage of the move is that you get to retain more of your income. High net worth individuals often face progressive tax rates in high taxing states, where the tax rate increases according to the individual’s wealth.

This lands ultra-high net worth families in a lot of trouble. What is even more concerning for such individuals is that these high tax rates are more focused on income from investments, which is a major source of income for affluent individuals and families. High net worth people have various long-term financial goals that require extensive investment strategies and diverse portfolios.

However, these high tax rates can significantly bring down the effectiveness and performance of their investment portfolios. That’s why moving to states with no income tax is one way of improving their portfolio performance and retaining more of their investment income.

Tax Deductions are Capped

Another benefit of no income tax states is that their tax deductions are capped at $10,000. In 2017, a change in the tax code introduced caps at $10,000 on state and local tax deductions from your federal tax returns. This applies to property taxes as well. Before this, the tax deductions were limitless.

If you had been living in New York or California, some of the highest-taxed states, and owned many properties or earned the top 5% income, these deductions meant that you got to save very little from your federal taxes. In comparison, by moving to a state with no income tax, you get to get your income at the state level without getting affected by the tax deduction caps.

Better Economies

Especially if you are running a business, moving to a no income tax state can present you with much better economic opportunities, allowing you to grow your business even faster and reap better profits. Comparing these nine states with no income tax against the nine states with the highest income tax revealed that the former saw a much bigger increase in the production of jobs as well as population growth.

Not only that, but these states with no income tax also grew their tax revenues at a much faster pace. All this equals better economies and more opportunities for high net worth individuals with $5 million to $500 million in liquid assets to grow their wealth.

Better Retirement Planning

Retirement planning is a major aspect of any affluent individual’s financial plan. For such individuals, it’s not enough to just accumulate all that wealth. They also have to make sure that they grow that wealth enough to last them all through their retirement and help them fulfill all their financial targets and life goals.

Consequently, retirement plans are heavily reliant on investment strategies and portfolio performances. Therefore, if all your investment income is being drained away in excessive taxes, it can leave you uncertain about your retirement and whether you will be able to live the kind of life you wanted.

That’s why these states with no income taxes are so beneficial for your retirement planning. They can ensure that your retirement goes as planned or even better. Moreover, for a sound retirement plan, you will need the best financial advisor too. Learn how to find one from our guide for investors worth $10 million or more. You can also reach out to our advisors to get started on your retirement planning.

Cheaper Commercial Real Estate

Ultra-high net worth and high net worth families can also benefit from the cheaper commercial real estate if they choose to move to one of these states with no income tax. Again, especially if you run one or several businesses, these cheaper commercial spaces can be a big advantage.

You can find office spaces or even buildings at much better rates as compared to real estate in high tax states. One of the reasons behind this is the lower costs of living in these no income tax states, which then translates to lower real estate rates and, subsequently, more savings for high net worth individuals.

Disadvantages of Moving to States with No Income Tax

So, is it better to live in a state with no income tax? After all that, it might seem the only answer is yes. But in reality, moving to such states often comes with some disadvantages as well. Whether moving to such states is beneficial for you also has to a lot with your personal circumstances.

Here are a couple of reasons why moving to such states isn’t as great as it seems.

Other Taxes are Used to Maintain that Tax Revenue Stream

Even if these states are not imposing income taxes, the truth is that they have to collect taxes somehow to maintain their revenue stream and fund all their projects. Therefore, while they might not be charging income tax, they will be obtaining those taxes in some other form.

Consequently, you might end up paying excessive property taxes or sales tax to cover up that gap, and you might not end up saving on taxes as much as you hoped. Get in touch with our wealth managers to learn how to minimize your tax bills.

It’s Not Always Easy to Leave a High Tax State

Moving to a no income tax state also presents a lot of hurdles for some wealthy individuals, and there can be many complications as well. For instance, you have to think about where you are working and where you are living. If you are living in a no income tax state but are working from a high tax state, your income will still be charged with high tax rates.

Similarly, if you chose to permanently shift your entire business and residence to a no income tax state, that’s not very easy either. High tax states won’t always let you move so easily. They might drag out your residency status case in courts for a long time. Alternatively, they might go after your properties in that state and impose even higher property taxes or income taxes in case you are renting the space.

How Can I Live Tax-Free?

No one enjoys paying their taxes, and that’s why at the end of the day, we’re all wondering one thing: how can I live tax-free? While it is extremely difficult to live without paying any taxes at all, you can significantly minimize your tax bill by employing smart tax management strategies. For instance, you can consider moving to a no income tax state.

Similarly, you can consider changing your investment strategies to focus on a combination of active and passive management rather than heavily relying on active management, which leads to excessive tax expenses. Read about other such shifts you can make for boosting your portfolio growth from this handy guide.

Final Thoughts

Moving to a state with no income tax isn’t as simple as it sounds. You have to account for many factors before making that big move. Depending on your unique financial or even personal circumstances, moving to one of these states might not always make sense for you. You might just end up facing more financial losses.

Nevertheless, it is pretty apparent that these states do hold a lot of benefits and advantages, specifically for ultra-high net worth individuals as well. Therefore, your best course of action is to choose and consult an experienced financial advisor who can assess your situation and advise accordingly whether the decision to move to such a state will be beneficial for your case. You can learn how to choose such advisors from our comprehensive guide here.

Alternatively, you can also reach out to Pillar Wealth Management directly. Pillar Wealth Management is a private wealth management firm that deals exclusively with high net worth individuals with $5 million to $500 million in liquid assets. We consider each client’s individual needs as well as their unique circumstances to come up with customized financial solutions that best cater to our clients’ goals and targets. Our exceptional and diverse services are aimed at helping our clients attain financial success and security. Schedule a no-obligation consultation with our managers today.

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