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Wall Street Texas: A NYC-Austin Move Can Save High Earners 40% or More

Colorado river passing by downtown Austin

Thanks to no state income tax and a cost of living that’s practically on par with the national average, high earners from more expensive cities like New York City, San Francisco and Chicago can maximize their income by relocating to the Texas state capital. 

To determine how much you can save by moving to Austin, Texas, SmartAsset compared the cost of living and tax rates to those of New York, San Francisco and Chicago for people earning between $150,000 and $650,000.

Key Findings

  • People making $650k in Austin get taxed less than people making $150k in San Francisco and New York. The highest-earning workers in Austin are taxed at a rate of 35%, while workers earning $150,000 in New York and San Francisco face tax rates of 37% and 36%, respectively. 
  • Moving from New York to Austin will save higher earners 40% or more of their salary. In fact, someone making $650,000 in the Big Apple can save over $250,000 annually by relocating to Austin after accounting for taxes and the cost of living. 
  • Top earners moving from Chicago to Austin will only save 12% of their salary. After factoring in taxes and the local cost of living, someone earning $650,000 per year saves $76,362 by moving to Austin – nearly 182,000 less than a similar high earner moving from New York.
  • San Franciscans can save up to 11 points on their taxes in a move to Austin. People making $650,000 per year in San Francisco are taxed at a rate of 46%, while those in Austin pay just 35%. High-earning New Yorkers save an average of 10 points on their taxes by heading to Austin or double what high-earning Chicagoans save in a similar move (5 points). 

NYC → Austin

While New Yorkers contend with costs that are 122% higher than the national average, the cost of living in Austin is more or less in line with the average. Since there’s no state income tax in Texas, high-earning New Yorkers who move to Austin would also get a more favorable tax treatment. Effective tax rates for high earners range from 37% to 45% in New York, while their counterparts in Austin are taxed at rates of 27% to 35%. Overall, a move from New York to Austin can save a high earner between 40% and 44% of their salary. 

San Francisco → Austin

People who move to Austin benefit from a cost of living that’s nearly 69 points lower than it is in San Francisco. Meanwhile, taxes will eat up between 36% and 46% of a high earner’s income in San Francisco, but only 27% to 35% in Austin. As a result, people making between $150,000 and $650,000 in San Francisco can save up to 34% of their salary by relocating to Austin. 

Chicago → Austin

High earners from Chicago stand to save significantly less on a move to Austin than their counterparts in New York and San Francisco. Overall, Chicagoans who earn between $150,000 and $650,000 can save roughly 12% of their salary by moving to Texas’ capital city. That’s partly because the cost of living in Chicago is just 13 points higher than it is in Austin, contributing to the lower overall savings. However, high earners do save on taxes, which range from 32% to 40% in Chicago.

Data and Methodology

Tax data comes from SmartAsset’s paycheck calculator and accounts for federal, state and local taxes. Base assumptions were used for a single tax filer. Cost of living premiums come from the Council for Community and Economic Research’s Q1 2023 data and includes necessities pricing, including housing, transportation, utilities, groceries, healthcare and miscellaneous goods.

Financial Tips for High Income Earners

  • Manage your tax bill. Maxing out retirement accounts, donating to charity and contributing to a 529 plan are all ways to lower your taxable income – and your eventual tax bill. Investing in tax-exempt municipal bonds is also a way to reduce taxes. These bonds generate interest that’s excluded from Medicare surtax calculations and isn’t subject to federal income tax either.
  • Work around the Roth income limits. Your income may be too high to qualify for Roth contributions, but a legal loophole known as the backdoor Roth IRA allows you to work around those income limits. Simply make pre-tax contributions to a traditional IRA and then convert that account into a Roth variation. You’ll have to pay income taxes on the money you convert, but those contributions will grow tax-free from there. Additionally, required minimum distributions (RMDs) don’t apply to Roth accounts, helping you potentially save money on taxes in retirement.
  • Work with a financial advisor. A financial advisor can help you invest your money, plan for the future and protect your assets. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

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