California vs. Florida Taxes: What LA Business Owners Actually Save

By Tax Shack | June 2026 | Los Angeles, CA

Every year, California business owners watch friends and competitors pack up for Florida where there’s no state income tax, lower cost of living, and comparable warm weather year-round. It sounds like a no-brainer. But is it actually?

We're going to break down the real numbers: what you save, what you give up, and what it actually means for your bottom line as an LA small business owner.

The Big Difference: State Income Tax

This is the headline everyone leads with and for good reason.

• California: Top marginal rate of 12.3%, plus a 1% surcharge on income over $1 million (the Behavioral Health Services Tax, formerly the Mental Health Services Tax), bringing the effective top rate to 13.3%, which is the highest in the nation. (California Franchise Tax Board, 2025 tax rate schedules)

• Florida:0% state income tax. Florida's constitution prohibits a state income tax on individuals. (Florida Department of Revenue)

It's worth noting that most California filers never get close to that 13.3% top rate. According to FTB's own published bracket structure, the 9.3% bracket is where most high-earning professionals in LA actually land, and that eye-catching 13.3% only applies to income above $1 million.

The Business Tax Picture

California (source: FTB)

• S-Corp / LLC minimum franchise tax: $800/year, even if the business made nothing

• S-Corp income tax rate: 1.5% on net income

• Corporate income tax (C-Corps): 8.84%

• Capital gains: Taxed as ordinary income, up to 13.3%. California offers no preferential capital gains rate the way the federal system does

Florida (source: Florida Department of Revenue)

• No individual income tax: Owners of pass-through entities (S-Corps, partnerships, most LLCs) pay $0 Florida state income tax on business profits

• Corporate income tax (C-Corps): 5.5%

• No state-level capital gains tax

• No annual minimum franchise fee for LLCs (though an annual report fee applies)

For most small business owners structured as S-Corps or LLCs, Florida's lack of a personal income tax is the headline advantage. California's franchise tax and income tax apply on top of whatever federal tax is owed.

What the Numbers Don't Tell You

Here's where it gets more honest.

Property insurance in Florida has become a real cost factor. Florida's homeowners insurance market has seen significant rate increases in recent years, particularly in coastal areas, driven by hurricane risk and insurer pullouts. For a business owner who owns their home, higher insurance premiums can offset some of the income tax savings, though the size of that offset varies widely by location and isn't something we'd put a precise dollar figure on without knowing your specific situation.

California's property tax structure works differently than people expect. Under Proposition 13, assessed value (and the resulting tax) is capped at the purchase price, rising at most 2% per year. This means longtime homeowners in California often pay a lower effective property tax rate than the headline numbers suggest. Florida's effective property tax rate is reported at roughly 0.78% statewide. (Tax Foundation, 2026 Facts & Figures)

The federal SALT deduction cap matters for California filers. The deduction for state and local taxes on federal returns is currently capped (the cap was set at $10,000 historically, but recent federal legislation adjusted this for certain filers). This cap has historically reduced the federal benefit of state tax payments for high-earning California residents, since they can't fully deduct what they pay the state. We'd recommend confirming the current-year cap and any phase-outs directly with your preparer, since this is an area where federal rules have shifted recently.

You still pay federal taxes either way. The federal corporate rate (21% for C-Corps) and self-employment tax obligations apply regardless of which state you're in.

So Should You Move?

That depends entirely on your situation. A few honest scenarios:

Moving probably makes financial sense if:

• You earn $300,000+ as a pass-through business owner

• You work remotely and aren't tied to California clients

• You rent rather than own (no insurance exposure)

Moving probably doesn't pencil out if:

• Your clients and revenue are tied to Los Angeles

• You own your home and would face Florida's insurance costs

• Your business operates physically in California. You'd still owe California taxes on California-sourced income regardless of where you live

That last point is critical. California taxes income earned in California even if you've moved. If your business operates here, moving to Florida doesn't eliminate your California tax obligation, it just adds Florida as a second state to navigate.

What LA Business Owners Should Actually Do

Before making a decision this big based on tax savings alone, talk to a tax preparer who knows California and ideally one who deals with multi-state situations regularly.

At TheTax Shack, we work with LA small business owners on exactly these questions: what you actually owe, what strategies are available to you right now (like the PTET election), and whether a move would actually change your tax picture.

Stop by our LA location or give us a call. We'll give you the real numbers for your actual situation, not a hypothetical.

Quick-Answer FAQ

Does Florida have state income tax? No. Florida's constitution prohibits a state income tax on individuals or pass-through business income. (Florida Department of Revenue)

What is California's top income tax rate? 12.3%, plus a 1% surcharge on income over $1 million, bringing the effective top rate to 13.3%, which is the highest in the nation. (California Franchise Tax Board)

If I move to Florida but my business is in California, do I still pay California taxes? Generally yes. California taxes income sourced from California regardless of where you live. A genuine move would typically need to involve relocating the business's operations and activity, not just your personal residence. This is exactly the kind of situation where a multi-state tax consultation matters.

What's the corporate income tax rate in Florida? 5.5% for C-Corps. Pass-through entities (S-Corps, LLCs) generally pay no Florida state income tax on business profits. (Florida Department of Revenue)

Is it worth moving from California to Florida to save on taxes? It depends heavily on your income level, business structure, homeownership status, and whether your revenue is tied to California. The income tax savings are real, but factors like property insurance costs and where your business actually operates can change the math significantly. This is a decision worth running by a tax professional with your actual numbers rather than a general comparison.

Sources:

-       California Franchise Tax Board, 2025)

-       Florida Department of Revenue

-       Tax Foundation, 2026 Facts & Figures

This post is for general informational purposes and isn't a substitute for personalized tax advice — figures are based on current published rates and may change with future legislation.