Hi I am in the process of purchasing my first home (co-op) in NJ with my wife. We currently live in NY and work in NY. How will taxes affect us for 2005 file?
Will we have to pay both NJ and NY taxes?
The property offers a 67% deductible should we expect to pay more or less by living in NJ and working in NYC? Even though we will be getting a tax break by buying the co-op?

Thank you for your help this is a crazy time and I have lots of questions.

Ben

Ben:

The bad news is that both NY and NJ will tax your pay. :mad:

The good news is that NJ will give you a credit for the taxes you pay to NY. :)

The even better news is that you will have to pay ZERO NY City taxes. :D

It is likely that, since the NY tax rate is higher than NJ, the NJ credit will completely offset any taxes due to NJ. Hence, you should probably have no NJ taxes withheld from your pay.

Since you will probably take a mortgage out for the coop and pay property taxes, you will itemize on your 2005 tax return, which should result in lower taxes paid and a higher refund. :)

While I assume living in NJ is cheaper than living in NY, your commuting expense will probably be higher than if you lived in NY.