Take the salary, subtract state income tax to get take-home, then divide by the local price level to express it in constant purchasing power. Do that for both places and compare the results. The number you want is what you would have to earn in the new city to stand still — if the offer beats it the move pays, and if it does not, a larger gross figure is not an improvement.
Do it in this order
Gross salary. Minus state and local income tax, using effective rates rather than headline ones. Minus your actual housing cost. Minus anything else that genuinely changes — commuting, childcare, insurance.
What remains is comparable. Everything else people put into these comparisons is noise relative to those four lines, and housing is usually larger than the other three combined.
Why an index will mislead you
A cost-of-living index averages over a basket — groceries, transport, healthcare, housing, utilities — weighted for an average household. Your household is not average in whichever direction your life differs.
Housing is the component with by far the widest variation and the widest range of personal situations. Somebody renting a studio and somebody buying a four-bedroom house face completely different multipliers between the same two cities, and one index number cannot describe both.
Use a real listing, not a percentage
Find an actual place you would live in each city and use its actual price. That single substitution changes the answer more often than any other adjustment in this whole calculation.
It also forces an honest conversation with yourself about what you would actually accept. People compare a city they know well against an idealized version of one they do not, and the listing is what stops that.
The tax layer people skip
State income tax ranges from nothing to over ten per cent at the top. Eight states levy none on wages. Several cities and counties add their own on top, which almost never appears in a state-by-state comparison.
Use effective rates. Most states have brackets, so the headline rate applies only to income above a threshold and overstates what you would actually pay.
What survives, typically
A third to two-thirds of a large metro premium usually survives housing and tax. So the popular claim that a coastal salary is all cost of living is wrong, and so is treating the raw gap as what you gain.
Registered nurses earn $216,740 in San Jose against $97,550 nationally. That premium does not survive intact and it does not vanish either, and where it lands depends almost entirely on whether you rent or buy.
The costs that move the wrong way
Cheaper places are not uniformly cheaper. Two vehicles instead of one, longer distances, higher per-unit prices at smaller retailers, and less competition in services all push against the housing saving.
Childcare and healthcare access are the two that most often surprise people, because both can cost more in time than in money and neither appears in a salary comparison at all.
The line that is not a cost
Retirement contributions reduce your take-home and increase your assets. Treating them as a cost in a city comparison distorts it, especially where employer matching differs between the two offers.
Compare the employer contribution as a percentage separately. On a long horizon it is frequently worth more than the difference in base you are agonizing over.
What the arithmetic cannot settle
Whether the market for your occupation is deep in the destination. A comfortable net figure in a metro with two employers who need you is a worse position than a tighter one in a metro with fifty.
Check the concentration of your occupation before you check the cost of living. It decides what happens if the job ends, and no amount of monthly surplus compensates for having to move again.
A worked shape
Suppose an offer is $40,000 higher in an expensive metro. State tax takes several thousand of that. Housing, using real listings rather than an index, takes most of the rest for a family buying and much less for one person renting.
The same offer is therefore a clear gain for one person and roughly neutral for another, from identical numbers. Which is why the honest version of this calculation is always personal and never a published index.
Common questions
What is a regional price parity?
A published measure of the local price level where 100 is the national average, built from prices actually collected in that metropolitan area. It covers the whole basket rather than housing alone.
Should I use rent instead of the price level?
Only if housing is an unusually large share of your own spending, and then deliberately. Rent is one line in a budget and using it as a proxy for everything distorts both directions.
Do I need the exact tax rate?
An effective rate is enough for a comparison. Headline top rates mislead in progressive states, and several states have no income tax at all, which is where the largest single differences come from.
What is the most common mistake?
Adjusting the new city and not your own. If you deflate one side only, you have made the move look worse by exactly the amount you failed to adjust.
Does this tell me whether to move?
No. It tells you whether the offer leaves you better off in purchasing power. Commute, career and whether you would like living there frequently outweigh it — but you should know the number before deciding to ignore it.
How do I adjust a salary for cost of living?
Gross, minus effective state and local tax, minus your actual housing cost from a real listing, minus anything else that genuinely changes.
Why not use a cost-of-living index?
It averages over a basket weighted for an average household. Housing has the widest variation and depends on whether you rent or buy and how many bedrooms you need.
How much of a big-city premium survives?
Typically a third to two-thirds after housing and tax — so it neither vanishes nor arrives intact.