Millions of people are leaving high-tax states like California and New York, according to recent IRS migration data, and billions of dollars in income are shifting out of both states each year.
In California alone, IRS-based analysis shows roughly $10 billion to $12 billion in adjusted gross income (AGI) has left the Golden State in a recent year, much of it tied to higher-income households.
New York has also seen multibillion-dollar net outflows (about $9.9 billion), particularly from upper-income taxpayers relocating to lower-tax states like Florida and Texas.
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At the same time, two new policy developments are reshaping the conversation around what it actually means to “leave” a high-tax state: a proposed wealth tax in California and a second-home tax proposal in New York.
Together, these measures raise a practical question for taxpayers: Does moving from a high-tax state to a low-tax state actually end your tax exposure or actually change how closely it’s reviewed by auditors?
California wealth tax coming in 2026?
As Kiplinger has reported, a proposed wealth tax in California is heading to the November 2026 ballot, where voters will decide whether to impose a one-time 5% tax on some ultra-wealthy households.
The measure would apply to a very small number of taxpayers (roughly 250 according to some estimates) at the top of the wealth distribution, based on net worth, including assets like stocks, real estate, and business ownership interests.
Supporters argue in part that the “wealth tax” would raise significant revenue, about $20 billion a year, per the Institute on Taxation and Economic Policy (ITEP) estimates. Critics say it could increase incentives for high-net-worth households to relocate, especially given existing migration trends already showing sustained outflows from the state.
Gov. Gavin Newsom, who opposes the measure, reportedly told the New York Times, “This will be defeated — there’s no question in my mind,” referring to the ballot measure.
Also worth noting: Because wealth taxes depend on residency status at the time of assessment, the proposal has also renewed attention on how states determine whether someone is still considered a resident after a move.
New York ‘Second-Home Tax’ targets luxury property owners
Meanwhile, in New York, Gov. Kathy Hochul and NYC Mayor Zohran Mamdani are working to advance a proposed tax on high-value second homes, often referred to as a “pied-à-terre” tax.
The proposal focuses on luxury properties valued at over $5 million, particularly in high-value urban markets like New York City, that are not primary residences.
Supporters say the annual surcharge would capture revenue from high-end real estate that benefits from city infrastructure and help fund vital public services. In a Tax Day launch video, Mamdani said, “When I ran for mayor, I said I was going to tax the rich — well, today, we’re taxing the rich.”
Opponents argue the measure could discourage investment and further accelerate out-migration from New York among wealthy homeowners.
Interestingly, while structurally different from a wealth tax, the “second home tax” raises a similar issue: how property use and residency status are defined when taxpayers own assets across multiple states.
Residency rules for tax purposes when you move: Why they matter
So what does all of this have to do with relocating?
Moving to a lower-tax state may seem straightforward: change your address, buy a new home, and start fresh. But for tax purposes, due to residency rules, leaving a state like California or New York isn’t always that simple.
That’s because residency rules determine your status based on where you have established your permanent home (domicile) and how much time you spend in your home state.
It’s important to note that residency rules aren’t unique to NY and CA. Every state with an income tax has some version of them, and many rely on similar “facts and circumstances” tests to determine where you reside for tax purposes.
What’s different right now is the spotlight. As more high-income households consider relocating, those rules are getting renewed attention — particularly in states where the financial stakes are rising.
So, how can you potentially still owe taxes to your former state, at least for a period of time? Here are some common situations.
Your “domicile” doesn’t change overnight.
States look beyond a new address to determine where your permanent home really is. If your life remains centered in your old state, it may continue to treat you as a resident.
You’re spending too much time in your former state.
Even after a move, crossing the common 183-day threshold in your former state can trigger residency for tax purposes.
Ongoing ties signal you haven’t fully left.
Maintaining a home or holding on to key financial and business connections can work against your claim.
Your daily activity leaves a trail.
In some cases, auditors might review travel logs, credit card records, and even phone location data to determine where you actually spend your time.
The transition year raises questions.
The year you move — when ties overlap, and timing matters most — is often where residency disputes arise.
Here’s a simplified example:
A taxpayer moves from California to Florida, buys a new home, and files as a nonresident. But they keep a property in California, spend significant time there, and maintain business ties. If the state determines they didn’t fully break residency — or spent too many days there in California — they could still be taxed as a resident by California on their full income.
To reduce the risk of your former stale’s tax bills following you after you think you’ve left:
- Make the move decisive, not partial.
- Track your days carefully throughout the year.
- Update legal and financial records to match your new state.
- Keep documentation showing when and how you moved.
- Take extra care in the year of the relocation.
Moving to lower tax states: Bottom line
Moving to a lower-tax state can reduce your tax bill, but only if the move holds up under scrutiny. Remember, your residency for tax purposes is generally determined by what you do, not just what you file, and without a clear break, your former state may still have a claim on your income.
Also, keep in mind that no-income-tax states often have to make up for lost revenue elsewhere, so sales and property taxes can sometimes be higher. Consider the tax-tradeoffs of various states before you start packing boxes.
As for what comes next: In California, November could be a key inflection point if voters weigh in. In New York, the path runs through the state’s legislative and budget cycles, where proposals can evolve — or stall — over the coming months. Stay tuned.
