What’s covered in this article – click on a link to learn more:
- State-Specific Fees and Taxes
- Housing Costs
- Storage Costs
- Insurance Premiums
- Cost of Living
- Moving Services
- Travel Costs
- Change in Commute
- Utilities and Services
- Licensing and Registration
- New Employment Costs
- Adapting to Local Culture
- Pet Relocation
Moving to a new state is an exciting adventure, but it can also come with its fair share of hidden costs that catch many people off guard. Forbes reports that the average cost to hire movers to move a three-bedroom home locally costs around $2,100. A long distance move out of state jumps the cost up to $5,500 for the same size home. How much your move costs depends on the size of your home and where you’re moving.
So, while you might be prepared for the obvious expenses like renting a moving truck and buying new furniture, there are numerous other financial factors to consider when relocating to a different state. In this comprehensive guide, we will delve into the often-overlooked hidden costs associated with moving to a new state.
State-Specific Fees and Taxes
Different states have varying fees and taxes that can significantly impact your financial situation. These include vehicle registration fees, property taxes, and income tax rates. Logan Allec, CPA and owner of Choice Tax Relief, says there’s a variety of ways that states generate revenue. “The biggest thing to expect when crossing state lines is just how different the states are in taxing their residents,” he said. “Some states have very high income taxes, some states have no income tax. Some tax Social Security and others do not.”
Dana Ronald, President of Tax Crisis Institute says people often underestimate how much impact income taxes may have on a person’s financial situation. “Some states have progressive tax rates, meaning the higher your rate is, the more you make,” he said. “Others may have a flat rate where everyone pays the same percentage regardless of income level. It’s essential to understand how these changes may affect your financial portrait in the long run and to consider any potential tax savings or cost increases associated with moving from one state to another.”
Allec agrees. “Obviously, if you’re going from a state that has no income tax, like Wyoming, and you move to a state that has a high income tax, like New York, that could be tens of thousands of dollars that you’re going to have to budget for every year because now you have this income tax bill,” he added.
Working with a tax professional can help you assess what your tax burden is in your current state and what your tax burden would be annually living in a different state. The Tax Foundation can help provide state-specific information on taxes as well as the individual state’s Department of Revenue.
Housing costs are one of the most obvious expenses associated with moving. However, don’t overlook the variations in property taxes, homeowners association (HOA) fees, and utility costs that can vary significantly between states. These factors can significantly affect your overall housing expenses.
Allec says that just because a state may not have sales tax, they might be tacking on taxes somewhere else. “If a state doesn’t have sales tax, they might make up for that in other ways like maybe higher property taxes,” he said. “Here in California our property taxes are limited so our increases each year are pretty low. Other states the county assessor’s have almost unlimited capacity to increase the assessed value of a home every year. If you move to a state where that’s the case, you might be shocked at how much more you’re paying for property taxes.”
One additional note as it relates to HOA fees: are you moving to a neighborhood with strict rules around parking recreational vehicles (such as an RV or boat) in your driveway? If so, you may need to look into self storage options, like RV storage or boat storage. Storage is a great alternative for housing your recreational vehicle in between stints of adventurous road-ruling or if you’re unable or unwilling to keep it at home. Expect to spend anywhere from $75-$100 per month to use a self-storage facility.
Insurance premiums are other things to consider when moving out of state because you may find yourself paying more or less for similar coverage. Auto, home, and health insurance rates can go up or down, depending on various factors. For car insurance, rates are determined partially by an area’s claims history so if there are fewer accidents and break-ins in the new residence, you may see a decrease in your premiums and vice versa. Compare car insurance rates by state to get a general idea of how much to budget for moving forward.
On the other hand with health insurance, moving to a new state will trigger a special enrollment period as long as you had previous coverage prior to your move. Since individual market coverage is regulated and marketed at the state level, you’ll need a new plan when you move from one state to another. Premiums can vary based on age, zip code, and tobacco use so be prepared for your coverage to be priced differently in the new area. It’s important to report a move to the health insurance Marketplace as soon as possible so that you don’t have a break in coverage. If you have health insurance through your employer, let the company’s human resources (HR) department know of your move plans so they can respond accordingly.
Cost of Living
The cost of living can vary greatly depending on the state. Everyday expenses such as groceries, transportation, healthcare, and more are often included in a cost of living index, which shows a city-to-city comparison of what you’ll spend to live there. Typically it illustrates expenses such as food, housing, utilities, transportation, health care and other goods. Cost of living calculators can be useful to compare expenses between your current and new locations to see how far your money will go as well as whether you’ll have a comparable net income after you factor in everyday expenses. For example, a $50,000 salary in Chicago, IL would need to increase to $63,636 for you to maintain the same quality of life in Seattle, WA.
The most obvious things to consider when moving out of state are your actual moving services and the related costs. When you’re comparing how much moving companies cost, ask what the quote includes as some companies charge separately for fuel or other fees. Does their estimate include the labor? If not, you’ll need to factor in about $100 per hour for two workers.
While moving expenses are evident, there are sometimes hidden costs associated with packing your things. These might include additional charges for packing materials, special handling of fragile items, or temporary storage if your new home isn’t ready right away. The amount of materials you need will depend on the size of your home but plan for $100-$150 for a studio apartment and up to $500-$700 for a larger home. A detailed estimate from your moving company can help you avoid surprises later on.
Not only will you need to factor in the costs associated with moving your belongings, you’ll also need to move yourself and your family. If you’re moving a long distance, travel costs can be significant. Consider expenses such as flights, gas, meals and accommodations during your journey to your new state. These costs can quickly add up, so plan your travel budget accordingly. For example, the U.S. General Services Administration’s meals and incidental expenses reimbursement rates for the 2022-2023 fiscal year put the cost of food at $59-79 per person per day. The average daily rate of the United States hotel industry was $148 in 2022. Your plane ticket costs will vary depending on where you’re headed but plan to spend anywhere from $100 to $1,000 per person. And finally, use the gas cost calculator provided by AAA to estimate fuel costs for your personal vehicle.
Change in Commute
A move to a new state may entail a new job or a different daily commute. And while remote work is here to stay, not every employer is taking advantage of the post-COVID work culture. Some have transitioned to a hybrid work model (where you split your time between home and the office) but not all. Frankly, there are many industries that don’t have a choice but to require in-person labor. Which means you need to factor in the cost of commuting to and from work in your new state.
According to Clever Real Estate, the average commuter in the U.S. spends $8,466 and about 19 percent of their annual income on their commute every year. Additionally, the average driver in America loses 32 hours to traffic annually. Calculate the potential impact of commuting costs on your budget, including fuel, vehicle maintenance, public transportation expenses, tolls and parking fees. That should give you a better portrait of a moving state to state cost when it comes to commuting.
Utilities and Services
Although some aspects of moving to a new state can be handled after you arrive at the new residence, it’s not recommended to wait when it comes to utilities. Some states have higher utility costs than others, and you may need to set up new accounts for services like cable, internet, and waste disposal. You’ll need to factor in these expenses when preparing your budget for the move.
First start by making a list of all utility services you’re currently using in your home. The most common ones are:
- Electricity (power)
- Water and sewage
- Cable TV
- Waste removal
- Home security
If the new area is not serviced by your current utility companies, you’ll need to create accounts with new service providers. You could owe a cancellation fee, connection fee, and a deposit. Plan for the worst-case scenario so that these costs are factored into your move budget.
Licensing and Registration
Updating your driver’s license, vehicle registration, and other documents to comply with your new state’s requirements is a must-do item as soon as possible. Many states offer a grace period of between 10 and 60 days to update these important documents. Of course, abiding by this process can incur additional fees. Contact the new state’s Department of Motor Vehicles (DMV) office for a breakdown of potential fees and guidelines. Bankrate offers a state-by-state table of DMV websites as well as the corresponding grace period so you know how much time you have to update your documents.
New Employment Costs
If your move is related to a new job, one thing to be mindful of is that in 2018 a significant change to the tax code occurred when the 2017 Tax Cuts and Jobs Act (TCJA) took effect. Relocation benefits used to be considered “qualified moving expense reimbursements” by the Internal Revenue Service (IRS). Now, all relocation benefits are considered taxable income.
What’s more is that unless you are an active duty military member moving as a result of a military order, your moving related expenses are not tax deductible. Here’s a bit of good news: most employers that are offering relocation benefits will provide new employees with additional funds to cover the cost of the taxes. As part of your onboarding process and relocation, ask them if they offer tax gross-ups so you know whether you’ll be expected to pay taxes on what is now treated as income. Indeed offers a look at how the TCJA affects your tax liability and how you can reduce it.
Consider other additional expenses such as a professional wardrobe change, certifications required in the new state, or even potential gaps in income during the transition. By planning for these unexpected employment costs, you can ensure a smooth financial transition.
Adapting to Local Culture
One of the most underrated aspects of moving to a new state is the opportunity to experience a new local culture first-hand. Participating in community events is a way to immerse yourself and build meaningful connections in your new residence. While not a direct monetary cost, adapting to the local culture and lifestyle of your new state might involve expenses you hadn’t considered. Exploring new hobbies, social activities, or memberships in local organizations can impact your budget.
There is no one-size-fits-all answer to how much it costs to relocate your pets but is typically based on a few factors, including how many pets you’re moving, the types of pets and breeds, the location they are moving from and to and whether they’re moving by ground transportation or air.
If you have pets, moving them to a new state can also involve health checks, vaccinations, and potential quarantine costs. PetRelocation estimates the cost to relocate one small dog across the U.S. by airplane is around $1,500 on average. Ensure you budget for these expenses to ensure a safe and stress-free move for your furry family members. This guide can help you think through the additional costs to relocate a pet; it may be more than you’re expecting.
Moving to a new state is a significant life change that requires careful financial planning. By considering and budgeting for the hidden costs mentioned above, you can ensure a smoother transition and avoid unexpected financial surprises during your move. Research and preparation are key to making your move a positive and financially sound experience.