High net worth individuals flee high tax states

A billionaire recently told his New York staff that he was closing shop and relocating to Florida. Although warmer winters may have played a role in the decision, the move was more likely motivated by an attempt to reduce the entrepreneur’s tax obligations.

Why would tax obligations fuel a move across the country?

The Tax Cuts and Jobs Act (TCJA) resulted in a $10,000 limitation in the State and Local Tax (SALT) deduction. This limitation hit high net worth individuals and businesses in high tax states particularly hard. As such, some are considering relocating to low- or no-income tax states.

Carl Icahn, the billionaire noted above, is one such example.

State income tax authorities are not taking claims a resident has relocated lightly. It is not uncommon for state auditors to investigate the claim, looking for continued ties to the state that could result in continued tax obligations. State auditors generally review business operations, residence of family members and location of most cherished belongs like the family pet or any unique collectibles. The auditor will then use any evidence gathered during the investigation to support a connection to the state to establish the taxpayer continues to have residence within the state — potentially resulting in continued tax obligations.

Will this impact other states, like Maryland?

Although not as highly taxed as New York, Maryland is rated as one of the higher taxed states in the nation. The state income tax per capita in New York is currently set at $2,249 while Maryland is $1,498. Although significantly less then New York, it is still much higher than states like Florida, Texas and Oregon, which have no income tax.

Those who wish to make the transition to a lower or no income tax state are wise remove all ties to the higher taxed state to avoid a finding in favor of the state. This can mean selling property and moving business operations to the desired state. It is also wise to protect your interests by seeking legal counsel if the move does lead to an audit.

No Comments

Leave a comment
Comment Information
Email Our Team

Contact Us to Get Started Today

Located in the Washington, D.C area, we serve clients in the District of Columbia, Maryland and Northern Virginia, as well as across the country and overseas. For a free initial consultation, call 202-381-1261 or complete our brief online form.

Bold labels are required.

Contact Information

The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.


Privacy Policy

Six Convenient Office Locations in and around the DC Metropolitan Area

Washington, D.C.
1050 Connecticut Ave NW #500
Washington, D.C. 20036

Phone: 202-618-1873
Fax: 888-235-8405
Washington Law Office Map

Columbia Office
10440 Little Patuxent Parkway, Suite 300
Columbia, MD 21044

Phone: 202-618-1873
Phone: 410-497-5947
Fax: 888-235-8405
Columbia Law Office Map

Annapolis Office
839 Bestgate Road
Suite 400
Annapolis, MD 21401

Phone: 202-618-1873
Phone: 410-497-5947
Fax: 888-235-8405
Annapolis Law Office Map

Fairfax Office
8280 Willow Oaks Corporate Drive
Suite 600
Fairfax, VA 22031

Phone: 202-618-1873
Phone: 703-988-4817
Fax: 888-235-8405
Fairfax Law Office Map

Rockville Office
199 E. Montgomery Avenue
Suite 100
Rockville, MD 20850

Phone: 202-618-1873
Phone: 240-599-5009
Fax: 888-235-8405
Rockville Law Office Map

Baltimore Office
400 East Pratt Street
8th Floor
Baltimore, MD 21202

Phone: 202-618-1873
Phone: 443-743-3381
Fax: 888-235-8405
Baltimore Law Office Map