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Old 04-24-2009, 08:41 AM
 
Location: NJ
980 posts, read 2,477,643 times
Reputation: 1860

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I currently live in NJ and am contemplating moving to PA (Phila. suburbs). It just occurred to me that we might get hit with higher state & local income taxes. Can you please tell me if I am figuring this out correctly?

CURRENT

Live in NJ - I pay 5.25% NJ state income tax (based on our income bracket)
+ Work in Phila - I pay 3.5% Phila. non-resident wage tax
However, the 3.5% wage tax gets applied to what I owe on the NJ income tax (due to reciprocal tax agreement).

So my net state/local income tax burden is 5.25%

PROPOSED MOVE TO PA

Live in PA suburb (not Philadelphia): pay 3.07% state income tax
PLUS
Work in Phila - pay non-resident 3.5% wage tax

From what I can tell, PA does not have a reciprocal agreement like NJ where I can apply the Phila. wage tax against my state income taxes.

So my net state/local income tax is 6.57 (plus on top of this we might incur local municipal taxes depending what town we move to, right?)

Does this look correct to you?
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Old 04-24-2009, 08:49 AM
 
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No. I live in Upper Moreland township in Pa, and I work in Philly. The 3.5% I have to pay Philly counts as my taxes for my township, which I think off the top of my head is 1%, so I don't need to pay any additional to the township. I would still have to pay all of my state taxes...that's totally separate, but I don't get hit with my township tax because I work in Philly.

So it would be - PA State tax (I don't know what the rate is)
plus 3.5 Philly wage tax
and if your township that you live in has a tax, you wouldn't need to pay it because of your tax burden to Philly.

Bad thing is that even though I work in Philly, and they take 3.5%, where I would only owe 1% to the township, I can't take that leftover 2.5% and put it towards my husband's taxes. He doesn't work in the city, and will end up owing that 1%. Too bad I can't lump him into mine.
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Old 04-24-2009, 08:59 AM
 
Location: Montco PA
2,065 posts, read 4,290,092 times
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Sassygirl, you are correct. If you live in PA and work in Philadelphia, you pay both the state income tax and also the Phila wage tax. So from a state income tax perspective you will pay more by living in PA in your situation.

Bambiying is also correct in that if you move to a municipality in PA that has a 1% earned income tax, your Philadelphia wage tax will offset the 1% tax. However, you will not get a refund of the excess of the wage tax over the local tax.

The local tax system in PA is a bit confusing, but your analysis is correct. If you are moving solely for a tax standpoint, which you've mentioned in other threads, then you obviously need to see if your real estate tax savings by moving to PA more than compensates for the additional local income tax you will incur in PA.
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Old 04-24-2009, 10:24 AM
 
Location: NJ
980 posts, read 2,477,643 times
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Thanks to both of you. I am glad to hear that the Phila wage tax would cancel out any local municipal wage taxes. That's one good thing.

Running some numbers, I think even with the income tax increase we will still save because of property taxes (we are determined to cut our current $8200/year property taxes in half and will not buy a place unless the property taxes are at least that low and hopefully even lower). We decided recently that we're going to focus our relocation efforts on low tax areas only. We don't have kids and schools are not a concern.

Also, neither of us are married to our jobs long-term, so if we do move to PA it would save us a bit more money if we found jobs in the burbs instead of the city of Phila., to save on the wage tax (although I know sometimes the salaries are higher in the city).

Thanks again!
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Old 02-28-2010, 02:29 PM
 
1 posts, read 34,152 times
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I just started a new job and found out on my W2 form that my employer did not take out pa local income taxes what can I do?
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Old 03-01-2010, 11:53 AM
 
Location: Philly
10,026 posts, read 14,474,108 times
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Quote:
Originally Posted by Sassygirl18 View Post
Thanks to both of you. I am glad to hear that the Phila wage tax would cancel out any local municipal wage taxes. That's one good thing.
Running some numbers, I think even with the income tax increase we will still save because of property taxes (we are determined to cut our current $8200/year property taxes in half and will not buy a place unless the property taxes are at least that low and hopefully even lower). We decided recently that we're going to focus our relocation efforts on low tax areas only. We don't have kids and schools are not a concern.
Also, neither of us are married to our jobs long-term, so if we do move to PA it would save us a bit more money if we found jobs in the burbs instead of the city of Phila., to save on the wage tax (although I know sometimes the salaries are higher in the city).
Thanks again!
given how much you are paying in property taxes, you might even save money living IN Philly let alone one of it's more reasonable suburbs, wehther you work in the city or now. If you make a $100k, you pay 7% in income taxes in Philly which leaves 1200/yr + your residual state tax amount (which I calculate to be 935/yr if I understand NJ taxes right)to cover your property taxes. If you bought an abated property or something in the northeast you'd probably still come out ahead, without factoring in any subsequent wage tax decreases coming from the slots fund. that said, if you lived outside the city you'd save $500/yr at $100k/yr leaving $1700 for property taxes which, outside the city, is a relatively low amount. Even 2635 is fairly low but perhaps not impossible. Of course, if you make more than $100k combined the the tax benefit increases at a faster rate since taxes it apears NJ taxes at a rate of 6.1% over $40k and 7% over $75k. wage tax can be deducted from federal taxes.
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Old 03-26-2011, 07:48 AM
 
681 posts, read 1,347,374 times
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PMAN, you seeem to know alot about this so I have one for ya! Living in NJ, we pay close to 10K in property tax. However, we both work in NJ. If we moved to Philly and got a new(er) house with a tax ababtement, it looks on paper that we would do well. HOWEVER, if we had a non abated house or 1 with 2,3 years left...(and those that are ending are going up pretty high), how would that affect our write off? We would both pay CWT and the city property tax. Makes me wonder do we just "break even" here in NJ without the CWT? I also heard the city is going to reasses and move to a 20% property tax increase. Your thoughts on the good vs the bad in my case?
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Old 03-26-2011, 10:57 AM
Status: "Planning to head to the Sunshine state" (set 29 days ago)
 
Location: Phila
519 posts, read 899,216 times
Reputation: 624
I can't blame you for wanting to ditch high RE taxes, but have you factored in the cost of selling/buying a new home?
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Old 03-28-2011, 12:24 PM
 
681 posts, read 1,347,374 times
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With due dilligence, the cost of buying and selling can be neutralized. Yes you may take a hit on the sale but if you find your bottom line, you can likely make it up on the buy.
I'm not worried about that part. I'm factoring in the long run of property taxes and city wage tax. In 10 years my property tax in NJ will likely be off the charts but combined with CWT and the new "absolute value" property tax in Philly...I'm likely to break even. My other half makes over 150K so CWT would be high. Even with the tease of a 10 year tax abatement, property tax will be very high in Philly if you factor in the CWT. I just heard the 10 year tax abatements in the Reserve at Packer Park are starting to expire and residents are being hit the 5K to 10K in property tax? Factor in HOA fees, and CWT and you are now maxed out in Philly. Well, I would be!
The days of undervalued Philly properties are starting to see their end. The city is broke and they know it's untapped revenue.
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Old 12-24-2014, 01:12 PM
 
1,340 posts, read 3,380,368 times
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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...
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