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So I'm contemplating moving from DC to VA or MD next year because of the lower taxes. I will continue to work in DC though. I see that if I move from DC to MD but still work in DC I only pay MD income taxes because they have a reciprocity agreement. It appears VA also have the same agreement. Is that accurate?
Now onto another question. I work in Dupont Circle so the two options for living I'm looking at are Bethesda and Falls Church since they are each 6 metro stops away from my office which I think is ideal. Is the cost of living much more in Bethesda than Falls Church? My analysis states that MD is the cheapest of the 3 states (DC include) for income taxes but it isn't a huge difference between MD and VA. It appears the rent in Falls Church is lower than Bethesda. So overall I'm thinking Falls Church would be the better option when you take into account the cost of living? Any feedback anyone has would be greatly appreciated. Thank you.
The one thing to remember, is that DC doesn't necessarily have higher taxes when you calculate the entire tax burden. You may not be lowering your tax burden at all by moving to virginia or maryland. The personal property tax (your car) for example in virginia is a big one, it can be several thousand a year. I call this the illusion of lower taxes. The home property tax rate is also lower in DC as well. The taxes being lower crossing the border is more myth than reality. People are terrible at calculating their actual tax burden, they may only look at one factor and forget 2 or 3 other ones.
In fact Maryland has higher taxes than DC. You would not necessarily be saving.
DC is one of the few cities were the tax burden is sometimes lower than the suburbs. Again, personal experience may vary, and this is all dependent on circumstance. The myth of higher city taxes are just that in DC, a myth.
The one thing to remember, is dc's property tax rate is very low for example. Also instead of three layers of government (And three layers of taxes), there is just one layer. So virginia state taxes may be lower, but you may not be calculating the county tax burden, or the cities... This is especially the case in maryland.
The Car Tax in VA is probably as big a myth at this point. I pay a whopping $60 for my car although it is ancient. Regardless, to have a car tax bill in VA even close to $1,000, you would have to be driving a car worth about 40k.
And yes, people should think holistically. If youre a pack a day smoker, move to VA because that will save you like a grand a year because VA has lowest cig taxes. If youre an alcoholic, live in DC because VA has the highest alcohol taxes in the country. Also, DC's sales tax is much higher (10% vs 6% in VA).
The three layer issue doesnt change in VA at all. Instead of paying property and income taxes to DC, you would pay property and car taxes to county and income taxes to the states. No county in VA has an income tax like MoCo.
In the end, i wouldnt suffer a longer commute to live in a jurisdiction with lower taxes. The more important thing is if you planning on having kids. Then Id definitely leave DC.
Yeah I have no intention of having kids any time soon. Thanks for the feedback on taxes. I had no idea DC was the better option out of the 3. I do have a car that is older so I'm not sure the VA tax would be much. I didn't realize MD had county taxes. Very expensive to live in MD it appears. I do like VA but the commute from Falls Church to Dupont may not be worth it. However, I could save on housing costs.
It depends on whether or not you have kids, and whether or not you own a house. If you are having kids, Western Montgomery County, Howard County, and the Virginia suburbs are worth it. If you are a DINK or SINK, the calculations change. Especially when considering time and transportation costs. There is a reason why DC went from a city with 40% of the households with children, to 20%. It is because there is a benefit that comes from living in the city without kids, especially if you own property.
Things vary this way and that, but as a general rule, MD is the highest tax area and VA is the lowest, with DC in the middle. Now look at the difference in automobile insurance rates. Or gas prices.
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