10 Lessons From a CERTIFIED FINANCIAL PLANNER™ Professional Who Did It Himself

I lived most of my life in the Midwest – born and raised in Minnesota, college in Michigan and then 15 years in Chicago. My family was finally ready to get out of the cold, so we embarked on a two-year journey that ended with us settling into our new life in Phoenix. And we’re not alone; hundreds of thousands of people move to Arizona every year.

Whether you’re from the Midwest looking for a better climate or from the coasts looking for lower taxes and cost of living, there is a lot to like here. If you are thinking about making a move to Arizona, I’ve assembled 10 lessons for you to consider.

1. Taxes

I’m a tax nerd, so it’s no surprise that taxes are the first item on my list. Every state has unique quirks when it comes to taxes, and Arizona is no different. There are five progressive tax brackets, with the top being 4.54%. Compared to the rest of the nation, these rates fall right around the middle. Depending on where you are moving from, you might see a move up or down in your income taxes. Most of my clients here are retirees and they all enjoy the fact that Social Security income is exempt from Arizona state income tax. Arizona’s lack of an estate or inheritance tax is also a compelling feature for those impacted in states like Minnesota, Iowa, Illinois, Oregon, Washington and most of the Northeast.

2. North-South or East-West

I never thought much about my home’s orientation before buying in Arizona, but I figured that you would want to avoid a southern exposure for the back of your home and patio in order to avoid the blazing summer sun. I later learned that it is the western exposure that you want to avoid because of the direct exposure to the late afternoon sun when temperatures are at their peak. Furthermore, the ideal orientation will depend on how you want to spend your time in your back yard. South may be best if you have a pool, and north may be better if you prefer to have some shade for entertaining outside.

3. Community

Moving to a new state will be stressful and there will be numerous questions you need answered. Having local connections and community can go a long way in helping to solve the inevitable issues and questions that arise. Who’s a good contractor? What neighborhood is right for me? Lean on your local connections for questions like these. If you don’t have any, there are plenty of great community groups on social media that my family has found incredibly helpful.

4. Domicile

Your domicile, which determines your state residency for tax purposes, is something that you need to pay attention to. This is especially critical if you plan to split your time among multiple locations. It’s not just a matter of how much time you spend in State A vs. State B. It’s about where your life is tied to. Where is your driver’s license issued, where are you registered to vote, where do you conduct business? Those types of factors, along with the amount of time spent, will help determine your domicile. If you intend to become an Arizona resident to escape higher taxes in another state, it’s critical to pay attention to this.

5. Community Property

Arizona, along with eight other states, follows community property law as opposed to common law. This means that the assets of each spouse acquired during marriage are generally considered assets of the marital unit. In the event of divorce or death, each would be entitled to half of the marital assets. If you are married and plan to purchase a home in Arizona, community property law will come into play, even if you are not a resident. You should consult with an attorney about how this may impact your personal financial situation.

6. Estate Plan

Arizona’s community property laws will also have an impact on your estate plan. If done correctly, your Arizona estate plan could reduce your heir’s tax burden thanks to community property provisions that allow for a step-up of cost basis at the death of each spouse. Additionally, it’s imperative that you update your Powers of Attorney, Living Wills and Health Care Directives to ensure they are accepted in your new home state.

7. Get Outside

Arizona’s climate provides so much opportunity to enjoy the outdoors – so make a plan to get outside. Golfing, biking, hiking and walking are all great ways to enjoy the wonderful weather while getting exercise at the same time. Lounging at the pool is also a great option. Personally, I love firing up the barbeque, relaxing on my patio and watching the sun slip behind the mountains.

8. Get Approved

If you are serious about a buying property in Arizona, you should know that a preapproval letter or proof of funds is required to write an offer. In a competitive market like Phoenix, putting together purchase strategy well ahead of time is paramount, so be prepared and get preapproved with a lender that the seller will have confidence in. I suggest starting the purchase strategy months in advance so that you can ensure your liquidity, reserves, and income sources are all properly coordinated and documented.

9. Get Charitable

Arizona provides some incredible tax credits for donations made to certain qualified charitable organizations. A couple can donate more than $4,500 and receive a dollar-for-dollar reduction in their state taxes. You effectively get to reroute your tax dollars away from the public coffers and into causes that you care about. Take full advantage of this program!

10. Local Professionals

Assemble a team of local professionals that you can trust. They will be there to help smooth out the inevitable bumps you encounter along the way. Reach out to your community and connections so that you can find a realtor, mortgage banker, attorney, insurance agent and tax preparer.

Author Justin D. Smith Financial Advisor

Justin has been involved in the financial services industry since 2005. He earned a bachelor’s degree from the University of Michigan and is a frequent speaker on tax-smart retirement planning.

About Savant Wealth Management

Savant Wealth Management is a leading independent, nationally recognized, fee-only firm serving clients for over 30 years. As a trusted advisor, Savant Wealth Management offers investment management, financial planning, retirement plan and family office services to financially established individuals and institutions. Savant also offers corporate accounting, tax preparation, payroll and consulting through its affiliate, Savant Tax & Consulting.

Savant Wealth Management is a Registered Investment Advisor. Different types of investments involve varying degrees of risk. Savant’s marketing material and/or rankings should not be construed by a client or prospective client as a guarantee that they will experience a certain level of results if Savant Wealth Management is engaged, or continues to be engaged, to provide investment advisory services nor should it be construed as a current or past endorsement of Savant Wealth Management by any of its clients. Please see our Important Disclosures.