tax advantage living in NJ, working in Manhattan? (New York, York: credit, calculated)
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Hi -- I have found quite a few threads asking this, but none give a very straightforward answer, so I'd really appreciate if anyone could help me out.
I've accepted a job to start next summer in TriBeCa. I previously spent a summer a couple years ago living in Brooklyn Heights and working in the Financial District -- loved that. So I'd like to live in Brooklyn Heights/DUMBO or on its outer edges, IF the tax differences between living there and living in Jersey City/Hoboken are not as extensive as I've calculated.
I will be making about $120k a year before taxes. It looks like the NYS income tax comes out to about $7800, whereas living and working in NJ my income tax would be only $5500 for the state.
Question 1: If I lived in JC or Hoboken, does that mean I wouldn't owe NJ anything? That's the impression I get from some earlier threads on this topic, but there's quite a bit of "hedging" in those replies making it sound like NJ might still take a bit from me for living there.
Next, the NYC Income tax works out to more than $4000 a year -- I did the calculation last night but it's roughly $375 a month. Seems pretty significant considering rents in JC (looking through Craigslist) seem quite a bit lower already than in the areas of Manhattan I'd consider or in Brooklyn Heights/DUMBO, and a 30-day PATH pass is only $54.
Question 2: From what I've read here, the "commuter tax" was abolished not too long ago, meaning I'd save $4000+ a year living in NJ avoiding the NYC income tax? Or would NJ still snag some income taxes/etc that minimize this difference?
It seems that if I could save $4k+ a year and really liked living in Brooklyn/working in Manhattan, living in Hobokem/JC is a total no-brainer -- is it not? Seems like Hoboken/JC is a more 20-30 crowd anyway whereas B Heights felt more like a 30-40 crowd -- again preferable for me. From what I've found on Craigslist, my commute would be under 30 minutes and involves a PATH to WTC and a 10 minute walk from there to work.
Thanks for the reply, but most other threads addressing this on this forum suggest that there is an agreement between New York and New Jersey that would allow me to write off (most, all?) of my NJ State income tax liabilities if I work in NY and pay NYS income taxes. For example,
Here's what I've put together, but I'm still not sure it's correct ...If you live in NJ and work in NY, you are still subject to NY State taxes and NJ taxes. However, you can take a credit against taxed owed in NJ for taxes you paid in NY. The implications seem to be that if you have one job in NY, no other sources of income and live in NJ, you would have no tax liability in NJ because of the NY Tax credit. You would also be able to claim a full refund on the new york city tax (but your employer will still deduct it). You may also benefit if you generate investment income that is then taxed at the lower NJ rates.
Thanks for the reply, but most other threads addressing this on this forum suggest that there is an agreement between New York and New Jersey that would allow me to write off (most, all?) of my NJ State income tax liabilities if I work in NY and pay NYS income taxes. For example,
I am sure it's not 100% of each in a situation like this, or else no one would ever work in one and live in the other.
I've been doing this for 30 years.
If you work in New York full-time, taxes are withheld from your paycheck for New York but not for New Jersey. You file a Non-Resident tax form for New York. You also have to FILE for NJ state taxes because you live in that state, and at the end of the form there's a section called "credit for taxes paid to other jurisdictions". Since the NY state tax far exceeds the NJ state tax, you end up owing nothing to NJ.
If you work in New York full-time, taxes are withheld from your paycheck for New York but not for New Jersey. You file a Non-Resident tax form for New York. You also have to FILE for NJ state taxes because you live in that state, and at the end of the form there's a section called "credit for taxes paid to other jurisdictions". Since the NY state tax far exceeds the NJ state tax, you end up owing nothing to NJ.
Right. And you don't pay NYC income tax at all if you live outside the city limits, be it in NJ, in some other part of NYS, or in CT.
Someone said they'll still withhold NYC income tax, but I didn't think that was the case. Maybe if you move from NYC to outside NYC during a year, they don't change withholding.
Right. And you don't pay NYC income tax at all if you live outside the city limits, be it in NJ, in some other part of NYS, or in CT.
Someone said they'll still withhold NYC income tax, but I didn't think that was the case. Maybe if you move from NYC to outside NYC during a year, they don't change withholding.
I used to have to pay NYC income tax (as a non-Resident working in the city), but they changed that maybe 10 - 15 years ago. Perhaps the person who told you that remembers this from times past.
Right. And you don't pay NYC income tax at all if you live outside the city limits, be it in NJ, in some other part of NYS, or in CT.
Someone said they'll still withhold NYC income tax, but I didn't think that was the case. Maybe if you move from NYC to outside NYC during a year, they don't change withholding.
I don't think they withhold NYC income tax either but even if they did you could just fill out your W-2 in a way where it all works out i the end. Claim 50 exemptions or whatever you want. Most people don't realize that you can put down as many exemptions as you want on your W-2.
If the company you work for is based in NYS, then they will withhold NYS taxes from your paycheck, but not NJ state tax. They are not going to withhold NYC tax, which is 4% of your income, so you will be saving about $4800 per year based on $120K salary. NY and NJ have what's called reciprocity agreement,whereby the taxes that you have already paid to NY, will be applied to your liability due to NJ, therefore, you would not owe anything else to NJ, and possibly, even get a refund, because the last I recall, NYS tax rate is 8% and NJ tax rate is 7%.
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