I heard that you have to pay New York State and City tax if you work in the city, even if you live in New Jersey. Anybody has an idea how much more tax I need to pay if I work in NYC instead of New Jersey?

Thanks,

Bob

Hi Bob, given that this is April 13, I sure hope your question is hypothetical and not urgent.

This paying of taxes to 2 states happens a lot. Near me in Boston, a lot of people work in Massachusetts but live in New Hampshire. As it happens, NH has no income tax but MA does, and these people pay it. It goes on a Non-Resident form.

In states where both have a tax, you file a Non-Resident return where you do not live, and a Resident return where you do. You get a credit against the Non-Resident tax paid, on your Resident return. Just how this is calculated varies from state to state. But it is certain that you will never pay less tax by living in state A and working in State B, then if you both worked and lived in State A.

NY and NJ are close, and I think the NYC tax is being phased out somehow. I have not got the numbers in front of me, but I betcha the difference is half a percent tops.

It's not an easy question to answer. New York and New Jersey calculate their taxes differently. New York starts with your federal AGI and then makes adjustments up and down. As a non-resident, New York will calculate your tax based on all your income from any source, anywhere, and then prorate the tax based on the fraction of your total income from New York sources.

New Jersey is a Gross Income Tax -- there are no losses or subtractions. There are virtually no deductions other than alimony and a more liberal medical expense allowance.

New Jersey will allow you a credit against its tax for the tax you pay to New York.

Fortunately, New York City's non-resident wage and self-employed earnings tax was repealed in mid-1999 by the New York State Legislature (to the dismay of New York City).

Ira