State/Local Income Tax Question - PA vs. NJ (and Phila)

[Iching]

Originally Posted by NatasNJ

Clarification/Question: The NJ income tax rates are broken out in several brackets.

Single taxpayers and married taxpayers filing separate returns face six rates:

• 1.4 percent on the first $20,000 of taxable income.
• 1.75 percent on taxable income between $20,001 and $35,000.
• 3.5 percent on taxable income between $35,001 and $40,000.
• 5.525 percent on taxable income between $40,001 and $75,000.
• 6.37 percent on taxable income between $75,001 and $500,000.
• 8.97 percent on taxable income of more than $500,000.

Married taxpayers filing jointly, qualifying widow or widower and head of household filers face seven rates:

• 1.4 percent on the first $20,000 of taxable income.
• 1.75 percent on taxable income between $20,001 and $50,000.
• 2.45 percent on taxable income between $50,001 and $70,000.
• 3.5 percent on taxable income between $70,001 and $80,000.
• 5.525 percent on taxable income between $80,001 and $150,000.
• 6.37 percent on taxable income between $150,001 and $500,000.
• 8.97 percent on taxable income of more than $500,000.

Which means if someone makes $100k and is married and files jointly. They pay 1.4% on their first $20k ($280), 1.75% on their next $30k ($525), 2.45% on their next 20k ($490), 3.5% on their next 10k ($350),and 5.525% on their last 20k ($1105) equaling $2750 and not 5.525% on their $100k income ($5525). Correct?

This is before allowable state deductions, etc...

No. You would pay 5.525% on your $100k income ($5525). It is as bad as in NY. Where did you come up with that formula?

[NatasNJ]

Originally Posted by Iching

No. You would pay 5.525% on your $100k income ($5525). It is as bad as in NY. Where did you come up with that formula?

If you read the breakout of the NJ State Income tax it clearly states it.


Single taxpayers and married taxpayers filing separate returns face six rates:

• 1.4 percent on the first $20,000 of taxable income.

So on the FIRST 20k you pay 1.4%,

• 1.75 percent on taxable income between $20,001 and $35,000.

Then 1.75% on income between 20k - 35k.

Etc...

I am even more sure I am correct.

http://www.state.nj.us/treasury/taxa...esi.pdf#page=3

So for $100k salary in line 13 (Not counting deductions, etc..) Then going down to Table B. It equals 100,000 * .05525 - $2775 (which are the combined brackets laid out below the 80-150 income level)

So it would be $2750.

[BPP1999]

Originally Posted by NatasNJ

If you read the breakout of the NJ State Income tax it clearly states it.


Single taxpayers and married taxpayers filing separate returns face six rates:

• 1.4 percent on the first $20,000 of taxable income.

So on the FIRST 20k you pay 1.4%,

• 1.75 percent on taxable income between $20,001 and $35,000.

Then 1.75% on income between 20k - 35k.

Etc...

I am even more sure I am correct.

http://www.state.nj.us/treasury/taxa...esi.pdf#page=3

So for $100k salary in line 13 (Not counting deductions, etc..) Then going down to Table B. It equals 100,000 * .05525 - $2775 (which are the combined brackets laid out below the 80-150 income level)

So it would be $2750.

Correct. NJ's rate, like most other states with multiple rates, is graduated, meaning that income is taxed at varying rates. The Federal rates are like this as well.

[Keroberos]

Originally Posted by NatasNJ

So for $100k salary in line 13 (Not counting deductions, etc..) Then going down to Table B. It equals 100,000 * .05525 - $2775 (which are the combined brackets laid out below the 80-150 income level)

So it would be $2750.

Which means for an individual earning $100k salary in Philadelphia and living in NJ, their net NJ income tax bill is $0. There is a significant income tax incentive for most people who work in Philadelphia to live on the NJ side of the river. Depending on their situation, some or all of this may be offset by property taxes or commuting costs (bridge tolls particularly).

[NatasNJ]

Or you can be super smart like me and both work in NJ and live in Philly which allows us to pay over double in income taxes. Oh wait. That isn't super smart.