Buying land & building house: DE vs PA? (New Castle: sales, real estate market)

[Ghost Town]

Hello.
I am thinking about moving to DE/PA area in a near future.
And eventually would like to buy land and build own house rather than to buy existing one.
Considering either New Castle county, DE or Avondale/West Chester area, PA.
But what do you think, which area is better from long-term perspective?

DE: lower property tax, but higher state income tax.
PA: higher property tax but lower income tax.

Overall, seems to be not a big difference if I work. If I don't work, DE is better due to lower property tax.
Land prices are pretty much the same.

But what about building permits and codes? Where will be cheaper and easier to build?

Thanks for suggestions!

[Ghost Town]

So let's make my question simpler: for example, we have two equal lots (same acreage, same price, same location), each at different side of DE/PA border. Where would you prefer to buy a land and build a house: in DE or PA? (from tax and building code points of view)

[Pocopsonite]

How old are you? Other tax issues to consider are:
* PA does not tax retirement income (SS, IRA distributions, pensions). Delaware does, after a small exclusion. If this is the house you'll keep in retirement, and your retirement income is above the poverty level, this could be a significant factor.
* PA has 6% sales tax on purchases except most groceries and most clothes. (A proposal to raise it to 7.5% was defeated this year, but who knows about the future?) Delaware has no sales tax. A lot of people who live in PA shop in DE, especially for portable purchases like electronics and fine jewelry, to save the sales tax. Deliveries from DE to PA are generally taxable.
* If you live in one state and work in the other, you'll still pay income tax to the state where you're employed. It's not double taxation; the states work out credits for taxes paid to the other. But check with an accountant to see the effect, if applicable.

Both locations you're considering will be adversely affected by last year's spinoff of Chemours and this year, the Dow/DuPont merger. I believe the effects will last for years: There will be a glut on the real estate market as people have to relocate for new jobs or just move after retirement.

Don't know enough about building codes to comment. Be aware that in Delaware, outside an incorporated town or city the New Castle County codes will apply. In Pennsylvania, outside municipalities, the townships add an extra layer of regulation in addition to Chester County's.

[rdlr]

Originally Posted by Ghost Town

.
Land prices are pretty much the same.

Blanket Statement! Too many variables come into play.

[Ghost Town]

Originally Posted by Pocopsonite

How old are you? Other tax issues to consider are:
* PA does not tax retirement income (SS, IRA distributions, pensions). Delaware does, after a small exclusion. If this is the house you'll keep in retirement, and your retirement income is above the poverty level, this could be a significant factor.
* PA has 6% sales tax on purchases except most groceries and most clothes. (A proposal to raise it to 7.5% was defeated this year, but who knows about the future?) Delaware has no sales tax. A lot of people who live in PA shop in DE, especially for portable purchases like electronics and fine jewelry, to save the sales tax. Deliveries from DE to PA are generally taxable.
* If you live in one state and work in the other, you'll still pay income tax to the state where you're employed. It's not double taxation; the states work out credits for taxes paid to the other. But check with an accountant to see the effect, if applicable.

Both locations you're considering will be adversely affected by last year's spinoff of Chemours and this year, the Dow/DuPont merger. I believe the effects will last for years: There will be a glut on the real estate market as people have to relocate for new jobs or just move after retirement.

Don't know enough about building codes to comment. Be aware that in Delaware, outside an incorporated town or city the New Castle County codes will apply. In Pennsylvania, outside municipalities, the townships add an extra layer of regulation in addition to Chester County's.

Thanks for the info!
I am getting old, almost in mid 30s But still have a couple of decades to prepare for the retirement, so this is not No 1 question for me right now.
I never worked out of state, so basically if I live in DE but work in PA, I will pay only 3% PA state income tax, correct? And if I live and work in DE, my state tax will be 6%. But DE property tax will be about 1% vs 2% in PA, right?
Maybe I also should consider land in MD. I saw a lot more lots on sale there, in Elkton area. But what do you think about MD in terms of taxes and everything? I always considered it as one of the worst states to live. But if I pay PA state income tax, living in MD is maybe not too bad..

[nuts2uiam]

i hate to reduce this to the simplest terms but do you work from home that proximity to a job is not a question? If it is, then your ability to secure gainful employment might be the better place to start, rather than the place to live.

[Ghost Town]

Well tons of jobs in my field will be within 30 mi distance from the area where I am considering to buy land.
Exact location will be more clear after I get particular job and move there. But I lived in DE before.

[Mary2014]

Originally Posted by Ghost Town

Thanks for the info!
I am getting old, almost in mid 30s But still have a couple of decades to prepare for the retirement, so this is not No 1 question for me right now.
I never worked out of state, so basically if I live in DE but work in PA, I will pay only 3% PA state income tax, correct? And if I live and work in DE, my state tax will be 6%. ..

No, that is not the way it works. I no longer keep up on tax issues, but, in the past it has worked like this-


If you work in PA all 12 months and live in DE the entire 12months, you pay 3.07% income tax to PA. Then you file your taxes in DE and you get a credit for that amount on your DE taxes against what you had to pay in PA. You still owe the balance to DE. (You have to file taxes in both states - so more paperwork for you).


Now, if you lived and worked in PA for 7 months and move to DE and worked in DE for 5 months, then, you would only pay DE taxes for 5 months.


Also, most PA townships have a local income tax depending upon the township you live in. It is usually about 1 % of earned income, but, it varies by township. It is based upon where you live in PA. Does not apply to you if you live in DE. If you live or work in Philly it is around 4% as they have a rate that applies if you live there and a different rate if you only work there (even if you live in DE).

[Ghost Town]

Originally Posted by Mary2014

No, that is not the way it works. I no longer keep up on tax issues, but, in the past it has worked like this-


If you work in PA all 12 months and live in DE the entire 12months, you pay 3.07% income tax to PA. Then you file your taxes in DE and you get a credit for that amount on your DE taxes against what you had to pay in PA. You still owe the balance to DE. (You have to file taxes in both states - so more paperwork for you).


Now, if you lived and worked in PA for 7 months and move to DE and worked in DE for 5 months, then, you would only pay DE taxes for 5 months.


Also, most PA townships have a local income tax depending upon the township you live in. It is usually about 1 % of earned income, but, it varies by township. It is based upon where you live in PA. Does not apply to you if you live in DE. If you live or work in Philly it is around 4% as they have a rate that applies if you live there and a different rate if you only work there (even if you live in DE).

Thank you for a lot of info!
So 4% tax rate in Philadelphia is it total tax including 3.07% PA tax, or it comes in addition to that, and combined tax will be 7.07% there?

[Mary2014]

Originally Posted by Ghost Town

Thank you for a lot of info!
So 4% tax rate in Philadelphia is it total tax including 3.07% PA tax, or it comes in addition to that, and combined tax will be 7.07% there?

The Philly tax is a "local" tax in addition to the state tax. Philadelphia is a little different than the other local taxes in that if you work in Philly you pay a tax regardless of where you live. If you actually live in Philly you pay a slightly higher rate no matter where you work. If you are subject to Philly tax either as a resident or non resident you do not have to pay a local tax if you live elsewhere in PA.


To my knowledge I don't think DE communities have a separate local tax.


In PA, 90% if the townships have a local tax. The employer is required to withhold the local tax from the paycheck, which ever is higher, in the township where you work or the township where you live. If the employer is located in a township where there is a local tax on residents and non residents and you live in a PA township where there is no local tax - you have to pay the local tax where you work.


The only time you can avoid the local tax in PA is if the employer is located in a township that does not have a local tax on non residents and you also live in a township that does not have a local tax on residents. (Very unlikely). Or, if your employer is based in PA, but, you live and work in another state. (For example, your PA employer provides a service in NJ and you live in NJ and your job location is in NJ.)


And as I said earlier, if we are talking about Philly (live or work there) you will pay about 4%.


So, for planning purposes estimate that you will pay at least 1% in addition to the 3.07% PA state tax and as much as 4% in local taxes if you live or work in Philly.


In the past it was the responsibility of the individual to pay the appropriate local tax on earned income, but, so many were not paying it that a few years ago they made it mandatory for the employer to withhold the local tax. They must withhold the higher amount of your work location non resident local tax or your local residential local tax.