Hi,

I work in NJ and am debating on living in NY vs NJ and am trying to understand the differences that I will have to pay in taxes. I make around $80k and have 2 withholdings. Would there be that much of a difference in the amount of taxes that I would ultimately have to pay? Thanks in advance.

Yes, there would be some difference. In general, NJ income taxes are lower than NY, especially if you live in NYC. If you live were to live in NY and work in NJ, the way your taxes are calculated is as follows:

1. First calculate non-resident NJ taxes on the money you earn in NJ.
2. Then determine your NY/NYC taxes by (a) calculating amount you would owe on all your income if it had all been earned in NY (including your NJ wages, interest, dividends, capital gains, etc), then (b) subtract as a credit the amount already paid to NJ as a non-resident. In general you will find that you will owe NY money over and above what you paid NJ, even if your only source of income is your NJ wages (because of the higher NY tax rates).

So purely thinking about income taxes, you would most likely save money by living in NJ. You would need to evaluate other issues (e.g. property taxes may be higher in NJ).

ebaines:

If NJWorker is making only $80K, he/she cannot afford to buy property ANYWHERE in NYC, so property taxes are not an issue.

I can see working in NYC and living in NJ, as salary in NYC usually more than offsets the commuting costs.

However, if NJWorker works in NJ, he should LIVE in NJ and simply avoid the NY tax entirely.

ebaines:

If NJWorker is making only $80K, he/she cannot afford to buy property ANYWHERE in NYC, so property taxes are not an issue.


True. This may be another reason for NJWorker to make the move to NJ - he may find he can afford a home purchase in NJ as opposed to renting in NY.

The precedent has been set: Ebaines and ATE AGREE on something!