Tax in NY v.s. NJ State
A choice many young professionals make on moving to NYC, NY to work for one profitable company or another is where they should live. The choices are typically Manhattan, Queens Brooklyn, another borough of NY such as Staten Island, or New Jersey. Weighing the neighborhood, rent, social scene, and proximity to fast public transportation are not the only choices you should consider; the tax rate of NY and NJ are worth thinking about. In fact, New York City is one of the few cities in America to charge a unique city-tax for residents in any of its boroughs.
Our young example is a 23 year old woman working for Citigroup. As an entry level programmer working in straight-through-processing, she might make $100,000 a year in taxable income (it’s a round number, not a real one). She is single, and will not be claimed as a dependent. Now let’s run the numbers for NY:
- $100,000 taxable income
- 6.85% state tax
- $1,706 plus 3.648% of excess over $50,000 NYC tax
- $7,500 standard deduction
So the total NY taxes she’ll pay is ($100,000 – $7,500) * .0685 + $1,706 + ($50,000 – $7,500 ) * .03648, which is $9,593 in taxes to New York. The New Jersey tax works slightly differently:
- $100,000 taxable income
- 6.37% state tax
- $2,126 post-tax deduction
In NJ, she will pay the following taxes: $100,000 * .0637 – $2,126, which is $4,244 in taxes to New Jersey. This is $5,369 in taxes she gets to keep in her pocket, an extra $450 post-tax dollars a month of savings. Please note that I am not a tax accountant or lawyer, so these figures should not be taken as advice; they may very well be wrong. But to me, they provide real evidence that living in NJ has substantial tax benefit.
| This entry was posted on Tuesday, June 10th, 2008 at 9:58 pm and is tagged with level programmer, tax accountant, profitable company, unique city, standard deduction, substantial tax, tax benefit, young professionals, taxable income, boroughs, state tax, tax deduction, citigroup, staten island, public transportation, tax dollars, old woman, tax rate, proximity, brooklyn. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback. |
So much with the equity of the taxation system. Yes, living in NJ definitely provides and advantage and I don't understand why this discrepancy, taxes should differ for geographical reasons. People in this situation should have the right to benefit from tax relief.
I’m hoping someone could give me some sound adice. I have been accepted for employmnet for a great IT company as as an exec. admin with great benefits and the ability to study for my MBA. This co. is 1.8 miles away from my apt! I just interviewed with another more interesting co. in NYC as the Business Relations Manager. I have the experience to get the job and it will certainly challenge me more.
The problem, the salaries are within approx. $2000-3000 (the NY co. paying more) but I’m thinking about the taxes I’d have to pay and teh commute. With that in mind, i figure that the NJ job is the smarter choice. Any thoughts? Thanks
Hi,
I have a question related to this. I just started a new job in north NJ. Where should I live for income tax purpose, NY or NJ. Thanks,
Bobby you’re right, I meant to write simple “tax,” although the fiduciary adjective can be rightfully applied to the government-citizen relationship with regards to taxation in a fiat money system.
One minor comment:
If you live in NJ but work in NY you will be taxed NY state income tax which will then become a credit on your NJ state income taxes. Basically you end up paying NY state income tax for any income earned while in NY and NJ tax for income earned in NJ. If 100% of your taxable income comes from a job in NY, you pay zero NJ state income tax (I believe).
Hi Elliot
Just wondering what you mean by ‘fiduciary benefit’. Do you mean a financial benefit? I’m not sure that those words are synonymous. I used to think they were, then I looked up the meaning of fiduciary.
Cheers