State income tax: how geography eats your raise
I moved from Austin to Los Angeles in 2018, stayed two years, and moved back. The thing that made the math hard wasn't rent (which I expected). It was the California state income tax, which I did not fully appreciate when I signed the offer letter. At the $150k salary I had then, CA took about $11,500/year more than TX. Over two years, $23,000. That was my share of a down payment when I moved back.
State income tax doesn't get written about as much as federal because it's complicated (51 jurisdictions, each different). But for anyone making an interstate move or evaluating offers across states, it's often the biggest single lever. Here's the map.
The nine no-tax states
These states tax zero on wage income (some tax interest, dividends, or capital gains):
- Alaska
- Florida
- Nevada
- New Hampshire (taxes interest/dividends at 3% through 2026, phasing to 0)
- South Dakota
- Tennessee
- Texas
- Washington
- Wyoming
On a $10k raise at the $100k income level, you keep the full gross raise minus federal ($2,200) and FICA ($765), for a take-home increase of $7,035. That's the ceiling. All other states will net less.
The high-tax states on top of that same $10k raise
Using the Tax Foundation 2026 state rates, the top-marginal-rate states for our $100k to $110k single filer:
- California: 9.3% at this bracket. Take-home delta: $6,105 (vs $7,035 in TX)
- Hawaii: 7.9%. Take-home delta: $6,245
- New Jersey: 5.525%. Take-home delta: $6,482
- New York: 6.0% (state only; NYC adds 3-4% city). Take-home delta: $6,435 state-only
- Oregon: 8.75%. Take-home delta: $6,160
- Minnesota: 7.85%. Take-home delta: $6,250
- DC: 8.5% at this bracket. Take-home delta: $6,185
- Iowa: 3.8% (flat, post-reform). Take-home delta: $6,655
- Maine: 7.15%. Take-home delta: $6,320
Notice how California and Oregon run almost $1,000/year behind Texas on the same gross raise. Over a 30-year career, compounding forward, that's potentially $30k-50k of forgone real income per $10k of raises.
The flat-tax tier
Flat-rate states (the rate that matters for salary earners):
- Arizona: 2.5%
- North Dakota: 2.5%
- Pennsylvania: 3.07%
- Indiana: 3.05%
- Ohio: 3.5%
- Louisiana: 3.0%
- Missouri: 4.95% (flattened)
- Utah: 4.55%
- Kentucky: 4.0%
- Michigan: 4.25%
- Colorado: 4.4%
- Idaho: 5.3%
- Illinois: 4.95%
- North Carolina: 4.25%
- Mississippi: 4.4%
- Massachusetts: 5.0% (plus 4% surtax over $1M)
Flat tax is easier to compute and predict. The downside, for lower earners, is that flat taxes fall disproportionately hard compared to progressive systems. The upside, for high earners, is the opposite.
Career impact of the state choice
Rough math for a career-long earner at $150k average salary with steady raises:
A 30-year career in Texas vs California at similar salary costs about $450,000 in cumulative state tax at mid-career earnings levels. After decades of compounding in taxable accounts, that grows substantially.
This is why Silicon Valley folks who cash out an IPO often relocate to Nevada or Texas the week before a liquidity event. The state tax on a $5M equity transaction in California is north of $450,000. Texas: zero. One week of proper residency planning can be worth a house.
The same math applies more modestly to all of us. Choosing where to live matters.
When a state move makes sense
Three scenarios where I've seen the move work.
First, remote workers at peak income years. If your employer lets you work from anywhere and you're making $200k+ in a high-tax state, the savings from moving to TX/FL/NV/WA are meaningful. At $200k single in CA, state tax runs about $14,400/year. Same income in TX: $0. That's a material decision.
Second, pre-retirement. Retiring to a no-tax or low-tax state in the 5 years before retirement can compound into pension and 401(k) withdrawal planning. FL's 0% state tax on pensions and SS is a retirement magnet.
Third, right before an equity event. IPO, sale, liquidation. Get clean residency established (183+ days physically present, driver's license, voter registration, etc.) in a no-tax state before the transaction. Your CPA earns their fee here.
When the move doesn't work
Cost of living can easily wipe out state tax savings. NYC or SF to TX saves on tax but trades it for different cost structures. California's cost of living is high in urban cores and surprisingly normal in parts of the Central Valley. Don't simplify "tax savings" into "overall savings" without running the rent, grocery, and commute math.
And don't move for tax reasons alone. I moved back from LA to Austin for personal and family reasons; the tax savings were a nice bonus, not the driver. Friends, family, community, career networks all matter more over a 20-year horizon than a few percentage points of marginal rate.
The "part-year resident" gotcha
If you move mid-year, you file part-year returns in both states. Both states try to claim as much of your annual income as they can. California in particular is famously aggressive about audit-ing partial-year residents whose income spiked in the CA period.
Rules of thumb: establish clear dates, keep a physical-presence log, change driver's license and voter registration promptly, and sell or rent out the old-state home. California's residency audit is one of the few state audits I'd genuinely call painful.
Use the calculator
The pay raise calculator has all 50 states plus DC wired in. Flip the state dropdown to compare offers across jurisdictions. For the seven full-bracket states (CA, NY, NJ, HI, OR, MN, DC) we use piecewise math. For the rest, flat-rate approximation that's accurate within a few hundred dollars a year at salary earner incomes.
The Tax Foundation map and BLS regional data are good secondary references. For the exact state math including credits, your state DOR's withholding tables are the source of truth.
Takeaways
- Nine states tax zero on wages. California, Hawaii, and Oregon are the top of the scale.
- State tax delta on a $10k raise between TX and CA is about $930/year.
- Career-long, the state choice is worth $200k to $500k at middle-income levels.
- Moves make sense for remote workers at peak income, pre-retirement, and pre-equity events.
- Part-year resident math is messy; establish clean dates and residency.
Related: when to turn down a raise, where state tax turns a 10% offer into a real pay cut, and bracket creep explained for the federal side.