I am currently moving to the New York area and am wondering which is cheaper: New Jersey Income Tax or New York State/City Income Tax?

Just from looking at rates published online, New Jersey is definitely cheaper; however since I will be based and working in NYC everyday is New Jersey still significantly cheaper? Doesn't NYC apply its tax rates to workers who are based in the city regardless of their residency? If that's true, at what rate does NY state and city tax the worker? Is it a reduced rate?

Any help is appreciated.

Thx,
CM

CM:

If you work in NYC, but live in NJ, you will pay NY state taxes FIRST. NJ will give you full credit for paying those taxes, and you will NOT have to pay NJ taxes as a result.

Tax-wise, In my opinion, working in NY and living in NJ is the way to go!

Is that really true? I saw many posts saying that even if you live in NJ while working in NYC, you still have to pay NY state and NYC taxes. NJ will refund your NJ state tax, however, in either case you will end up paying both NY state and NYC taxes.

Abboy: ATE is correct. NJ generally has lower rates than NY State (although with the recent income tax surcharge they enacted at higher income levels - say above $250K - they're actually not much different). But the major difference is that only NY City residents pay the NYC Resident tax. If you commute into NYC you pay NY State income tax on your NY wages, but you do not pay NYC resident tax. To determine which is cheaper, be sure to consider other factors as well, such as the cost of housing (most probably cheaper outside of NYC) versus commuting costs and time.

PS - in the future when asking a follow-up question please do not use the Coment box, but rather the "answer this question" box located below it. Thanks.

Thanks Ebaines, that was truly a helpful advice. It helps making a well informed decision about relocating to start a new job in NYC/Manhattan. Thanks again.

But the major difference is that only NY City residents pay the NYC Resident tax. If you commute into NYC you pay NY State income tax on your NY wages, but you do not pay NYC resident tax.Ebaines: I found this information of www.nyc.gov ; "However, non-city residents who are Employees of New York City must file Form 1127 and pay taxes each year. The amount is equal to the personal income tax they would owe if they were City residents." Link: http://www.nyc.gov/html/dof/html/services/business_tax_nys_income.shtml

Does this mean that even if you don't reside in NYC, you will end up paying the equivalent amount of tax (NYC tax) regardless? Thanks.

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Originally Posted by abboy

Does this mean that even if you don't reside in NYC, you will end up paying the equivalent amount of tax (NYC tax) regardless? Thanks.

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IF you are a NYC employee, then yes. If you work for a company or government entity other than NYC, then no. Who are you planning to work for?

Yes, that is true, but they do NOT consider it a tax; it is a fee imposed on non-NYC residents who work for NYC.

The form that is completed is NYC Form 1127.

Thank you both for answering. Ebaines, I am considering a job at NYU Langone Medical Center. I am not sure if that would be considered a NYC employee, even though it is located in Manhattan. Nevertheless, renting in NJ is probably the best option.

You do NOT pay NYC taxes unless you prepare the tax return incorrectly.

If your employer is withhold NYC taxes, prove to hiom you live in NJ and he should STOP and refund the taxes already withheld.

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Originally Posted by abboy

I am considering a job at NYU Langone Medical Center. I am not sure if that would be considered a NYC employee, even though it is located in Manhattan.

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No, the fee and form 1127 that you've referred to applies only to people who are employed by the City of New York. That would be policemen, firemen, sanitation workers, MTA workers, public school teachers, etc. It would NOT apply to you, since you would be an employee of NYU.

That is simply not true; NY city income taxes are assessed ONLY on NY city residents. If you are having NYC income taxes withheld, show your employer that you live in NJ and he shold refund the withheld taxes and stop future withholdings.

If you properly complete the non-resident NY state return (Form IT-203), the NYC income taxs will be refunded to you.

ATE: unfortunately it is true. NYC assesses taxes on employees of New York City who do not live in NYC. See: Personal Income Tax which states in part:

Most people living outside the City are not subject to NYC personal income tax. However, non-city residents who are Employees of New York City must file Form 1127 and pay taxes each year. The amount is equal to the personal income tax they would owe if they were City residents.

My point to abboy was that he is not going to an employee of NYC, and therefore will not owe this tax.

Great information! That definitely makes it easier for me to decide where to rent next. You guys are awesome! Thank you again :)

Yes, IF YOU WORK for the city of New York.