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Supposing Emma lives in New Jersey and makes $100,000 a year. In NJ for her salary, she pays 6.8% in state income taxes. Suppose she moves to Maryland but there for the same salary she only needs to pay 5%. How much will she save per year in state income taxes? Is it $1800 a year (1.8 % of 100k)?

Or is that the most she can save and might be less depending on her exemptions and deductions?

  • Do you mean that 6.8% is her effective tax rate or her marginal tax rate? (Neither of those would actually be 6.8% for an income of $100,000 under New Jersey's current tax law.) And yes, of course you have to consider exemptions and deductions to determine how much tax you actually pay. She could also save more in Maryland. – Nate Eldredge Jul 9 '17 at 5:34
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If she kept her job in New Jersey but moved to Maryland, she'd still pay New Jersey income tax, so would not save anything.

If she took a job in Maryland then she would likely save money on income tax if the rates were as you suggest (and likely made up for by other taxes/fees). Determining the actual difference in income tax burden would be trickier to calculate, as neither state taxes all income, they will have deductions from total income to get to taxable income, and allowed deductions vary by state.

Further complicating the calculation is that both states have a progressive income tax (rate gets higher as taxable income increases) and the brackets do not line up between NJ and MD.

If her taxable income happened to be identical for both states, let's say $75,000, then she'd pay $2,651 in NJ, $3,510 in MD.

So while the marginal rate at $75,000 in NJ is 5.525% and 4.75% in MD, the effective rate is actually lower in NJ for her, MD would become more attractive as taxable income increases.

NJ 2016 Tax Brackets
MD 2016 Tax Brackets

That's all just for state income tax, local and county taxes could apply, and differences in sales tax and property tax rates would also factor in to a thorough comparison.

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    The local income taxes in Maryland is significant. The so-called piggyback tax is between 1.75% and 3.2% depending on the county. – mhoran_psprep Jul 10 '17 at 10:35

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