Right this is a fairly complicated matter but here goes.

firstly i am a British/Australian citizen (i have lived in Australia for the last 10 years). i am currently in nyc on a B1 visa until the end of July, i will be coming back sometime in august on a E1 visa and staying for a longer period of time. The company i work for is based in nyc, however i spend about 50% of my time in nj working with clients.

Basically the tax system confuses me a lot. i was considering living in nj when i move back, because i will be spending 50% of my time there and the rent is a lot cheaper. However i have also heard that i will pay a lot more tax if i do this. Can anyone tell me which would make more financial sense :

live in nj - pay more tax, pay less rent
or
live in nyc - pay less tax, pay more rent

thanks in advance to anyone who can offer me advice
David

AtlantaTaxExpert

David:

Go ahead and live in NJ, even though you will work in NY City.

There will be NO impact on your federal income taxes.

As for state, both NJ and NY state will require you file an annual income tax return. Since you work in NY state, you will have to pay NY state taxes (NY state taxes are the taxes that should be withheld from your paycheck). When you prepare your NJ state income tax return, NJ gives you a credit for the NY state income taxes paid. Since NY state tax rates are higher than NJ, in 99% of the cases, the credit will completely eliminate any NJ tax liability.

In fact, IMHO, most NJ residents who work in NY file their NJ return just to get a small (about $50) rebate for renters or property taxes paid. Were it not for that rebate, a significant amount of NJ residents who work in NY would not even bother to file since they know they actually owe no NJ state income taxes.

BTW, if you do not live in NY City, you will not owe any NY City income taxes.

BOTTOM LINE: Living in NJ and working in NYC will probably cost less, as you pay less in rent, pay NY state taxes, pay NO NJ taxes and pay NO NY city taxes.

daveh82

Thanks you very much for that advice. I have been trying to find the answer to that question for some time.

you have been a great help
thanks
David

AtlantaTaxExpert

Glad to help. Contact me uf you need help preparing your tax return; you'll find my rates very competitive to what you would pay to have them done in NY/NJ.