Tax savings of moving to JC from NYC

Submitted by InternetMedium4325 t3_y1ql25 in jerseycity

Hello, sorry if this is the wrong place to post this but I am considering moving from NYC to JC and wondering about the differences in income tax. I have heard people remark in the past that NJ has lower taxes than NY but I really don't know just how much a person could actually save if they relocated to NJ. I work fully remote and can no longer afford NYC so was thinking of going to JC for a year to try it out in the hope I might save a little extra money and live somewhere nicer. My job is not based in NYC and the team members on the project work all over the US. So I don't think I would have to still file as NY resident on my tax returns. I am wondering if there would be a good benefit to living in NJ aside from the saving a little on costs of living.

Many thanks.

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foot-trail t1_iryvku6 wrote

From what I understand you won't need to pay the 4% NYC tax if you live here.

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InternetMedium4325 OP t1_iryw0wu wrote

Thank you, is there an equivalent NJ income tax?

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foot-trail t1_iryw9mi wrote

For now no, although there have been whispers of a 1% income tax. Regardless, it won't be 4% though. I spend a lot of time in NYC but was born and raised in Jersey, I'd live here regardless, but the 4% savings nice

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JCwhatimsayin t1_iryyeca wrote

I'm sitting here trying to do the math on how 4% of your salary is covering MOST of your rent!

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InternetMedium4325 OP t1_irywz7s wrote

Yeah that's no joke saving this much, good for you! I just accepted that a huge chunk of my paycheck goes to paying for the privilege of living in NYC...a sad realization haha.

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nycnola t1_is0rutf wrote

What rumors?

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foot-trail t1_is2ihz7 wrote

I don't recall specifically but it was being discussed last year, I think the BOE tax hike killed any of that discussion thought

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nycnola t1_is9tozn wrote

It was discussed in Reddit and promptly shut down.

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sutisuc t1_is19w4x wrote

They would have to amend the state law to establish a local income tax. I don’t see that happening any time soon.

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IamLars t1_irywaq1 wrote

No. JC has no city tax. Higher property taxes though. Life is also generally cheaper than in NYC.

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InternetMedium4325 OP t1_irywqdy wrote

Thanks for the insight. Yeah just checked my tax deductions and I pay $646 per month in NY income tax. That would be pretty incredible to save that much per month.

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protox88 t1_irywx6x wrote

Check again whether that's your STATE tax/withholding.

NYC city tax is usually called Yonkers City tax or just NYC city tax. It's around 3% of your gross income.

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InternetMedium4325 OP t1_iryxwwy wrote

Hmm, thanks. It just lists it as 'NY state income tax'. Will investigate this more.

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PostPostMinimalist t1_iryykcu wrote

Yeah that's just the state tax which is different. There should be an NYC tax or local tax additionally. I'd guess it'd be around ~$425/month given your state amount

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InternetMedium4325 OP t1_iryysht wrote

Ah gotcha, thanks! So is it just the NYC 3% local tax that you save on in NJ or is state income tax lower also?

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PostPostMinimalist t1_iryzca4 wrote

State income tax is a bit lower too, but not as much of a difference.

You know what's easiest, check it out:

https://smartasset.com/taxes/new-york-tax-calculator
https://smartasset.com/taxes/new-jersey-tax-calculator

Just put in retirement contributions and I believe it's pretty accurate

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Blecher_onthe_Hudson t1_irz5gzp wrote

Hey, I just added those links to the New Resident FAQ. Thanks. Question: I can't remember from when my wife worked in NYC, I know the state income taxes get credited to NJ, but what happens to the NYC tax, is it not even collected?

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PostPostMinimalist t1_irz66q2 wrote

Correct, NYC city tax is only collected if you live in NYC.

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bodhipooh t1_irzj8qz wrote

That’s only partly right. If you work for the City of NY, and were born after 01/04/1973, then you also have to pay the NYC income tax.

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Chilltopjc t1_is321m7 wrote

If your job is based in NY, you must pay NY State income tax. If you reside in NYC you must pay NYC income tax as well.

If you move to NJ but your job is based in NY, you must still pay NY State income tax, but not NYC tax.

When you file your tax return, you’ll file in NYS as a nonresident. You must also file in NJ. But NJ will give you a credit for taxes paid to another state. NJ also gives you a break for property taxes paid on your home or rent paid. So I usually end up close to “break even” (meaning I don’t owe more or get much back than I had withheld for NYS income tax throughout the year).

If your job moves to NJ you’ll just file in NJ and pay NJ income tax.

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clenchingboar t1_is0aqcg wrote

By living in JC, you no longer pay the ~4% NYC city tax on income. NJ state income tax bracket rates are also lower than NY state.

JC downtown/Newport is also a special zone where you only pay 3.75% sales tax shopping in person. 6.65% sales tax for items shipped to you.

Foods cheaper too.

If you have an HSA though, those contributions do not lower NJ income tax ability.

Overall, it’s a win win living in JC vs Brooklyn. More take home pay and expenses are lower so you’re saving on both ends. Even path from Newport/grove/exchange place/journal sq is more pleasant of a ride to get to midtown or WTC than MTA.

Only downside is higher property tax so renting is a better deal if you’re just a single person. Lots of high rises coming online soon so too so hopefully supply outpaces demand.

Let me know if you have any other questions, I build payroll software so this is my wheelhouse and my partner and I did the math a year ago when deciding to move to JC or NYC

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reputationStan t1_is0mdwq wrote

> JC downtown/Newport is also a special zone where you only pay 3.75% sales tax shopping in person.

nearly all of JC has the UEZ tax rate of 3.3125%

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I_am_fourjeh t1_irzjdar wrote

You gonna trade 4% city tax for a pain in the ass path tax. Choose wisely.

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careful_guy t1_irzchre wrote

I am not 100% sure about this but I read somewhere that NJ residents don't pay sales taxes on certain items (including clothing, shoes, etc). Over a period of time, these sales tax savings do add up, especially considering the higher sales tax in NYC.

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cC2Panda t1_irzkfn0 wrote

NY has sales tax exemptions on food and a few other necessities as well.

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whybother5000 t1_is056jk wrote

Savings show up more clearly if you’re owning property in JC. Property tax is higher this side of the river but you save a bundle on city wage taxes. All else being equal you can net a sizable chunk here. Also cost of everything else — food, shopping, parking, fuel, etc will be lower than Manhattan. Cant comment on how Brooklyn contrasts with JC other than income tax savings.

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munsuro t1_is2hooh wrote

Along with special tax zone, there's no tax on clothes in NJ. Not sure if someone else already said it but that's a big perk in addition to the income tax benefit.

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JerseyCityGeordie t1_is0obmt wrote

Just because you are remote and live in NJ doesn’t mean you won’t pay NYC tax. You still have to be affiliated with an office for tax purposes so if your company doesn’t have an NJ office you will still be aligned with your NYC office and have to pay NYC taxes (and NJ taxes).

I work for a staffing company and have to explain this to hundreds of dumb IT workers who work remotely in Arkansas or Texas but are affiliated with the NYC office. They pay both taxes too.

Either way, don’t come to Jersey City, it’s the most expensive city in the US so if you can’t afford NYC, you can’t afford here either.

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Vertigo963 t1_is0yin9 wrote

This is just incorrect.

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JerseyCityGeordie t1_is1duue wrote

Except it isn’t. I deal with this every single day in my job. You probably don’t even have a job.

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Vertigo963 t1_is1v5he wrote

Whether I have a job or not, it's still the case that the NYC income tax applies only to residents of NYC. To the extent you have been advising your employer or your colleagues to the contrary, I'd urge you to retract that advice.

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JerseyCityGeordie t1_isb8ciu wrote

This is wrong. I literally work for the largest staffing company in the world and we handle payroll for over a million people in the US. We have been dealing with this since the start of CoVid. Vertigo either has vertigo or is just a complete idiot, and I am assuming it’s the 2nd one.

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Vertigo963 t1_isbd292 wrote

In addition to being rude and hostile, you've been pretty vague in your statements so far. Are you saying that persons who are not residents of New York City are nonetheless subject to New York City income tax? If so, when? Thanks.

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JerseyCityGeordie t1_isbjzkw wrote

Please go read my other replies on this thread. I don’t have time to keep repeating myself.

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Vertigo963 t1_isbqre8 wrote

OK. Everyone reading this (including all of us who moved to Jersey City to avoid the NYC income tax) can judge whether to believe (1) your statement that "if your company doesn’t have an NJ office you will still be aligned with your NYC office and have to pay NYC taxes" or (2) the website of the New York State Department of Taxation and Finance, which states "Nonresidents of New York City are not liable for New York City personal income tax" (https://www.tax.ny.gov/pit/file/nonresident-faqs.htm).

By the way, give a thought to whether the attitude you've displayed in this interaction is the one you want people to have generally online. I've tried to be polite and haven't downvoted you at all and you've just been consistently insulting and unwilling to discuss. In your defense, I blame Reddit quite a bit, as this format and the up/down arrows make real discussions difficult.

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InternetMedium4325 OP t1_is2i9u6 wrote

Yeah I am not understanding why somebody who lives in a different state and who’s job is not connected to NY would be still responsible for paying the city tax. I am far from an expert on this however. Can you please explain why this would be the case?

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JerseyCityGeordie t1_isb80s5 wrote

Companies are given huge tax breaks to open up offices in certain states and cities with the expectations that those employees for the offices will pay taxes and spend their money in the state or the city. Companies are unwilling to give up those tax breaks but need to hire people at lower costs, so they hire someone in Texas, payroll them through an NYC office so the company can keep the tax break.

Anyone saying that I am wrong has no idea how this works. I have been dealing with this every day since CoVid started and people started moving out of cities.

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InternetMedium4325 OP t1_isfusch wrote

Yeah I get this but I assume those people have relocated to other states and kept their NY job but work remote. I don’t have a NY job. The company does not operate out of the state and has physical headquarters in VA. So if I moved to say California, are you saying that I would be paying NYC city tax for the rest of my life because I used to live there?

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zero_cool_protege t1_is2tw28 wrote

You have to file both, not pay both:
"In short, you’ll have to file your taxes in both states if you live in NJ and work in NY. Like most US States, both New York and New Jersey require that you pay State income taxes. Some states have reciprocal tax agreements, allowing you only to pay taxes in your home state. New Jersey has a reciprocal tax agreement with Pennsylvania, but they do not have one with New York. Because of this, since you live in a different state from the one that you work in, you need to make sure you file a tax return in both.
In New York, you will need to file a non-resident return (IT-203). While in New Jersey, you will need to file as a resident (NJ-1040). But if you’re filing two returns, that begs the question: do you pay double taxes if you live in NJ and work in NY?
Great news for you, no! You do not have to pay double taxes. However, if you want to avoid paying more than you owe, it is vital that you file your New York return first so that when you file in New Jersey, you will receive a tax credit for any taxes you already paid. This will prevent you from being taxed on the same income by both States."

Source

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Vertigo963 t1_is3ccnq wrote

You're correct that a worker residing in NJ but working in NY State needs to file both NJ and NY State income tax returns. But the person you are responding to stated that such a worker needs to file and pay NY City income taxes, which is incorrect. In addition, you're not entirely correct when you say that this worker won't have to "pay both" - it's common that such a worker may owe money to both states, either because the worker has some NJ-only income (e.g., checking account interest) or because the NJ tax credit and the tax systems of the two states don't line up exactly right.

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