09 Oct Will my tax bill go down if I move from N.Y. to N.J.?
Q. I’m planning to move to New Jersey from New York City in two years. I’ll retire at age 42 with a pension from the city. I estimate my retirement income to be about $75,000 a year. I am a single mother with two small children. Will I have to pay state taxes to New Jersey, and if so, at what percentage?
A. Welcome to New Jersey.
As a resident of New York City, you’re currently subject to both a city income tax and a state income tax. New Jersey has a state income tax but no local income tax, said Bernie Kiely, a certified financial planner and certified public accountant with Kiely Capital Management in Morristown.
He did some quick calculations.
“As a single mom with two small children and $75,000 in income, your New York State tax would be $3,570,” he said. “Your New York City income tax would be $2,324 for a total tax of $5,894. This is 7.86 percent of your $75,000 in income.
Your tax liability would be less if you were a resident of New Jersey.
Your total income tax on $75,000 of income would be $1,331, or 1.78 percent of your income, Kiely said. You would be in the 3.5 percent tax bracket.
New Jersey also has a property tax deduction.
If you are a renter, 18 percent of your rent is deemed to be for real estate taxes, he said, but because we don’t have that information, we excluded it from the calculation.
Also keep in mind that New Jersey has a pension exclusion of $100,000 for married couples and $75,000 for singles in 2020 and after.
“To be eligible for this exclusion, you must be 62 years old or over and have income of $100,000 or less,” Kiely said. “Since you will only be 42 when you retire, you will have to wait a few years before you will be eligible for this exclusion.”
Email your questions to moc.p1582112988leHye1582112988noMJN1582112988@ksA1582112988.
This story was originally published Oct. 9, 2019.
NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.