The answer is weirder than the top-bracket headlines: at lean spending California is the cheapest of the taxing states, and at higher spending it's the worst. Here's the four-bucket model my calculator uses, with the gaps measured in dollars.
Federal taxes get all the attention in early-retirement planning, and the state line on the same return can quietly move your number by tens of thousands of dollars in either direction. It's also the input people most often shrug at in my calculator. So this page does two things: explains the four state buckets the calculator models and why they exist, and shows, with the engine's own numbers, what each bucket actually costs a real plan.
For an early retiree living off a brokerage account, the state question is really one question: how does your state tax long-term capital gains? Federally, gains get their own gentle brackets, including a 0% bracket that covers a lot of lean-FIRE income. States mostly don't copy that kindness, and they sort into four groups, which is exactly how the calculator's state selector works. No income tax at all: Texas, Florida, Nevada, Tennessee, South Dakota, Wyoming, Alaska, plus New Hampshire, which finished repealing its interest-and-dividends tax in 2025, and Washington with an asterisk: no income tax, but since 2022 it levies its own tax on long-term gains above roughly a quarter million dollars a year, indexed, so big single-year sales can trip it. Typical states: most of the rest tax gains as ordinary income at rates that work out to roughly 4 to 6% effective, which the calculator approximates as a 5% flat rate. California and New York get their own buttons because they're large, popular with the FIRE crowd, and tax capital gains as ordinary income through steep progressive brackets, topping out around 13.3% and 10.9% respectively.
I ran the same retiree through all four buckets: 45 years old, all-taxable portfolio, 4% withdrawal rate, single, $8,000 a year budgeted for health insurance, and asked the engine for the maximum sustainable all-in spending in each state. First at $1.5 million, then at $4 million.
| State | $1.5M portfolio | $4M portfolio |
|---|---|---|
| No income tax | $57,500/yr | $140,500/yr |
| California | $55,750/yr | $130,000/yr |
| Typical state (~5% flat) | $55,250/yr | $133,250/yr |
| New York | $55,000/yr | $132,500/yr |
Maximum sustainable all-in spending including health insurance, from the calculator's engine. Both columns assume the portfolio sits in a taxable brokerage.
Look at the ordering in each column, because it flips, and the flip is the most useful thing on this page. At the lean level, California is the cheapest of the taxed states, costing about $1,750 a year against a no-tax state, less than the generic 5%-flat state. That's progressivity working in your favor: CA has a standard deduction and low opening brackets, and a $55k spender selling appreciated shares only reports the gain portion as income, so most of it lands in those low brackets. A flat 5% has no low brackets to hide in. At $4 million, the picture inverts: California becomes the most expensive at about $10,500 a year against no-tax, because a six-figure income climbs into the brackets that built its reputation. The moral: a state's scary top rate describes its top bracket, not your retirement, and which state is "expensive" depends on how much you spend.
Put the gap in portfolio terms and the decision gets honest. At the lean level, the typical-state penalty of about $2,250 a year is the income from roughly $64,000 of extra portfolio at a 3.5% rate: real money, rarely worth uprooting a life for. At the $4M level, California's $10,500 gap is the income from about $300,000, which starts to sound like a conversation. Two more things tilt the math. Withdrawals from a 401k side are ordinary income in nearly every taxing state, so heavy retirement-account portfolios feel state tax harder than the brokerage case above. And the gain-versus-basis point cuts both ways: early in retirement your sales are mostly basis and states barely touch you; decades in, when positions are mostly gain, the same spending reports much more income. The deeper mechanics, including the federal 0% bracket this all stacks on, live on early-retirement taxes.
Not financial advice. Consult a fee-only fiduciary CFP for personalized guidance. Tax figures use 2026 brackets.