My bonus was reduced to half because of NYC taxes. Where should I move to?

Question

I'm used to having 38% of my income taken away in taxes here in NYC but after getting my bonus and seeing that nearly half of it was taken away in taxes ( 25% Fed, 7% State, 4% new york city, and another 7% in FICA, FMHI, SDI, etc.) I'm seriously considering a move to a more tax friendly city. Perhaps outside the 5 boroughs of NYC or even NJ. I think its ludicrous that people are taxed so high so that we can pay for "poor" people's medicine, food, and rent while they're sporting bling bling, drive Lexuses, and buy fancy brand ice cream at the grocery store. Any suggestions?

Answer 1

By moving, the maximum you will save is 11% (state and city tax). If you move to NJ or CT, you will stay pay the state income tax (NY non resident and NJ or CT resdient income tax) so you will only save the 4% city, (and pay a monthly commuting fee).
Your income in Ny is higher than what you will get in say FL or TX, to states with no income tax. That is to offset the higher cost of living, and taxes. Therefore, you might find out that after you move, the net result is no more after tax money for you.

Answer 2

Bonuses are withheld at statutory rates, which will be typically higher than regular compensation such as your regular salary which is withheld based on your W-4 allowances. The previous respondent is incorrect about nonresidents. If you are not a resident of NYC, even though you work in NYC, you are not subject to NYC income tax. State tax is a different story. If you are not a NYS resident, but you work in NYS, then you are still subject to NYS income tax.

Moving to Yonkers won't help because Yonkers will assess a city tax as well. Moving to NJ will just "shift" your taxes around. NJ has the highest property taxes in the country. Also, while NJ has a lower income tax rate, they tax on gross income, so you do not get deductions that will reduce your tax liability. Buy a more expensive house and pay more mortgage interest? Won't lower your NJ income tax. Give more money to charity? Won't lower your NJ income tax.

Answer 3

I sympathize with you. It is very annoying to realize the taxes we pay but you are talking like it is all NYC fault.

The 25% Fed and 7% FICA will haunt you no matter where you live. Most states have an income tax but your best bet would be Alaska, Florida, Nevada, South Dakota, Texas, Washington or Wyoming. They have no state income tax and most cities have no income tax.

Watch out for sales tax. We pay 9.75 percent in Tennessee.

Answer 4

Florida doesn't have any state income tax. Consider the cost of living implications no matter where you go though. In a lot of ways you are already compensated more for being in NYC with the higher cost of living by having a bigger paycheck. You could always take a pay cut and stretch your dollars further somewhere rural like the mid-west too though. Good luck!

Answer 5

There are states with no income tax including Florida, Texas and Washington.

Answer 6

Unfortunately, if you are still working in NYC even though you are no longer a resident, you will have to pay non-resident taxes to both the City and State.

Checkout:

http://www.tax.state.ny.us/pdf/2006/inc/it203i_2006.pdf

If you want to completely avoid paying state income taxes, consider living and working in one of these places:

http://www.ctj.org/html/spit.htm