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Old 03-25-2013, 09:46 AM
 
2,670 posts, read 4,519,607 times
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C, yes, I just pulled Waco out of my...uh, hat, but any low cost town could be substituted for the purpose of deciding whether our tax system is fair in that regard. Didn't mean to offend anyone.

On edit - and sorry, I left the word "tax" out (before "system") in my last post.
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Old 03-25-2013, 11:34 AM
 
Location: My beloved Bluegrass
14,653 posts, read 10,552,521 times
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There are always trade off for any place you live - here the cost-of-living and the traffic are the negatives. In my opinion, the positives, such as a robust job market and amenities, make up for it.
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Old 03-25-2013, 09:40 PM
 
30 posts, read 41,096 times
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Quote:
Originally Posted by Carlingtonian View Post
A lot of people who think about moving to NoVA and the greater DC area rationalize the massively increased housing costs by considering the signficantly higher salaries that many employers here offer, compared to what salaries are in many other places around the country.

I just did our federal taxes, and a few things made me realize why even a very healthy income here doesn't make up for the higher housing costs, due to several things about the federal tax system:

1. If you plan to use a conventional loan to buy a house, you'll need to make a down payment of 20%. In most of NoVA, that will mean at least $100K (on a home costing $500,000--which is at the low end for a detached house in a good school district here). Got that kind of cash lying around?

2. If you do an FHA loan, you can lower that to 3%. However, you will have to pay PMI of over $200/month. If your household income (for married filing jointly) is under $109K, you can deduct this. But because of that higher salary (intended to offset the cost of housing), you will very possibly be making over $109K as a household. So the higher income you get in the DC area actually hinders you in this instance.

3. A similar thing happens with medical expenses. You can't deduct medical expenses unless they are over 7.5% of your AGI. Again, higher AGI here means you have a higher threshold to meet in order to take the deduction.

4. The same thing happens with student-loan interest. If you're married filing jointly, the cap is $120K/year.

So before you take that job in this area, think long and hard about the costs of living here. It might well be worth it for you, but you will almost surely be devoting a much higher portion of your income to your housing, even with a much higher salary than in many other US cities.

On a related note: Imagine if Congress were to get rid of the deduction for mortgage interest. For us, this deduction alone saved us about $8400 in federal tax owed. (Alas, we still owe Uncle Sam somehow.)

I'm not sure how this is really different than some other places. If you buy a $500,000 house in the Chicago burbs, put down 5% and are paying PMI, then you're in the same boat as someone in NoVA. We have never gotten a deduction for health costs. And for most positions in the Chicago area, the pay is, on average, around $10,000 more in NoVA, but it's still going to put a household around at least $120,000 here. So, for someone in the Chicagoland area, it would definitely benefit them to move to NoVA. Basically the same housing costs, but lower property taxes and higher pay. Not to mention, IL has one of the highest unemployment rates in the country, so job opportunity is leaps and bounds better in NoVA.

Only downside of moving from the Chicago area now would be that due to the recession, especially with the high unemployment rate, the housing market here has tanked. That $500K house now, someone might be lucky to sell for $300K. And unfortunately (well, fortunately for people who live in VA) the recession hasn't hit NoVA as hard so housing prices haven't fallen like they have here (have they fallen at all?). But if someone in the right industry was willing to take a loss on their house, move into a TH in NoVA for a few years, they might eventually be better off in NoVA than if they stayed in Chicagoland. NoVA isn't all that bad, depending on where you're coming from.
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Old 03-25-2013, 10:18 PM
 
504 posts, read 651,017 times
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Quote:
Originally Posted by nepats1012 View Post
I'm not sure how this is really different than some other places. If you buy a $500,000 house in the Chicago burbs, put down 5% and are paying PMI, then you're in the same boat as someone in NoVA. We have never gotten a deduction for health costs. And for most positions in the Chicago area, the pay is, on average, around $10,000 more in NoVA, but it's still going to put a household around at least $120,000 here. So, for someone in the Chicagoland area, it would definitely benefit them to move to NoVA. Basically the same housing costs, but lower property taxes and higher pay. Not to mention, IL has one of the highest unemployment rates in the country, so job opportunity is leaps and bounds better in NoVA.

Only downside of moving from the Chicago area now would be that due to the recession, especially with the high unemployment rate, the housing market here has tanked. That $500K house now, someone might be lucky to sell for $300K. And unfortunately (well, fortunately for people who live in VA) the recession hasn't hit NoVA as hard so housing prices haven't fallen like they have here (have they fallen at all?). But if someone in the right industry was willing to take a loss on their house, move into a TH in NoVA for a few years, they might eventually be better off in NoVA than if they stayed in Chicagoland. NoVA isn't all that bad, depending on where you're coming from.
Housing is more expensive in NoVA than in Chicago and has been since before the "bubble".

The real estate market in NoVA took some pretty bad hits early on (some outlying areas lost 30%+ from '05-'09) but bottomed out by 2009 and has been stable to increasing since then. Unemployment has been consistently lower than national averages.

You're right that the higher pay/higher COL trade off could apply to any high cost area. People here are sensitive to this issue since there seem to be a fair number of people who move here and then are upset that they have a long commute and that their money doesn't go as far as they expected.
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Old 03-25-2013, 10:57 PM
 
1,444 posts, read 2,115,844 times
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IT generally isn't one of those fields and holding a clearance in this area boosts your pay (IMHO not as much as people claim) but it increases your stability.

Quote:
Originally Posted by seiketsu View Post
A couple of people touched on this but let me make it clear:

For many fields, your salary actually isn't any higher in DC than it would be elsewhere. A minimum wage job is still a minimum wage job. Government and NGOs pay the same, low salary wherever you are. The reason a lot of people make it work here is not because they get a few extra pennies in their paycheck; it's because their jobs simply don't exist anywhere else. If your job exists somewhere else, you will almost always be better off financially in that other place.

That's purely from the financial perspective, of course. The DC area appeals in ways that aren't directly tied to jobs.

Last edited by va_lucky; 03-25-2013 at 11:08 PM..
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Old 03-26-2013, 07:54 AM
 
Location: Northern Virginia
4,489 posts, read 9,554,769 times
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Quote:
Originally Posted by nepats1012 View Post
If you buy a $500,000 house in the Chicago burbs, put down 5% and are paying PMI, then you're in the same boat as someone in NoVA.
Maybe I'm wrong, but I was under the assumption that a $500k house in NoVA would not cost the same $500k in the Chicago suburbs. If you're spending $500k an hour outside the city in Illinois, I would expect a large house with land and/or fancy schmancy upgrades. Here it got me a "fixer upper" 1970's home.
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Old 03-26-2013, 12:34 PM
 
30 posts, read 41,096 times
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Quote:
Originally Posted by CaliTerp07 View Post
Maybe I'm wrong, but I was under the assumption that a $500k house in NoVA would not cost the same $500k in the Chicago suburbs. If you're spending $500k an hour outside the city in Illinois, I would expect a large house with land and/or fancy schmancy upgrades. Here it got me a "fixer upper" 1970's home.

You have to go about an hour and a half out of the city to get some kind of land land and cheaper prices. 10 years ago my sister bought a 3BR ranch built in the 60's that hadn't been updated at all, in Arlington Heights, which is about 50-60 minutes from downtown, for $400K. Now, out where we live, about 80 miles from the city, our friends bought a very nice house on an acre for just under $300K. But within an hour of the city, you're going to be paying high prices for a not so great house. If you want something nice, built in the last 20 years, say in Arlington Heights, you're going to be paying over $500k, but you're not going to get any kind of land with that, mostly because there is no land. Course, remember, the housing market in IL completely collapsed, so those prices are a lot lower than they should be right now.
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Old 03-26-2013, 04:37 PM
 
2,670 posts, read 4,519,607 times
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Nepats, according to most COL calculators, housing is much cheaper in Chicago. For example this one says it's 54% cheaper.

Moderator cut: link removed, linking to competitor sites is not allowed

FWIW, the house hunter shows on HGTV always seem to be consistent with those calculators. The beautiful updated Chicago condos often shown on them are much less expensive than their counterparts in the DC area.

Last edited by Yac; 04-09-2013 at 06:04 AM..
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Old 03-26-2013, 05:47 PM
 
504 posts, read 651,017 times
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I've lived in both the Chicago area and NoVA and Chicago area housing is definitely cheaper than NoVA. My guess is someone in the Chicago burbs would pay 2/3 of what someone in NoVA would pay for an equivalent property.

On the other hand property taxes are at least 2x higher in Chicago, gas is noticeably more expensive, heating and cooling cost more due to the more extreme climate...

I will concede that the cost of living in Chicago is higher than average and many 100k plus households feel the same squeeze people in NoVA do between making too much to qualify for a lot of tax advantages or other benefits like grants for their children in college, but not enough to have much left over for extras like nice vacations or luxury items after paying for housing and other necessary expenses.
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Old 03-26-2013, 06:05 PM
 
Location: Maine
2,010 posts, read 2,701,100 times
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In general, civil servants in NoVA/DC have higher position grades than the equivalent positions/job responsibilities in other parts of the country. A secretary in a GS-11 position in DC would probably be at a much lower grade in other parts of the country. A GS-13 position in Georgia will often be supervising many more people than a GS-13 in DC. An enormous number of these higher paying civil servant jobs are anchored in DC/NoVA/MD, creating the secure job market that is frequently touted on this forum. Making more money is built into these job positions due to the higher cost of living in the NoVA/DC area. This is on top of the locality pay that is intended to compensate for the high cost of living. Now there should be an additional federal subsidy in the form of lower taxes for people who live and work in NoVA/DC?

As many posters tell others who complain about NoVA, if you don't like it, you can choose to leave. People who voted for the current president shouldn't whine about paying high/higher taxes.

Perhaps a tax reform--a flat tax rate--would solve many of these problems.
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