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Both New York and New Jersey are known for their high cost of living, and the income tax rates in these states only add to this reputation. Residents in these northeastern states pay some of the highest income tax rates in the country. If you're considering a move to the region, understanding how the states compare in terms of taxes can help you prepare a realistic budget. Both New York and New Jersey utilize a series of tax brackets, similar to those used by the Internal Revenue Service for federal taxes.
In New Jersey, both single and married taxpayers earning less than $20,000 are subject to a 1.4 percent tax rate as of 2012. A 1.75 percent rate applies to single filers earning between $20,000 and $35,000, and to married filers earnings between $20,000 and $50,000.
Single filers earning between $35,000 and $40,000 fall within the 3.5 percent bracket, while those earning more than $40,000 fall within the 5.525 percent bracket. Earnings above $75,000 are taxed at 6.37 percent, while earnings in excess of $500,000 are taxed at 8.97 percent.
Married couples earning more than $50,000 are taxed at 2.45 percent, while those earning in excess of $70,000 in New Jersey fall within the 3.5 percent tax bracket. Earnings in excess of $80,000 are taxed at 5.525 percent, while those exceeding $150,000 are taxed at 6.37 percent. Couples earning more than $500,000 fall within the same 8.97 percent tax bracket at single filers with this income level.
In New York, single filers earning less than $8,000 fall within the 4 percent tax bracket, while those earning $8,000 to $11,000 are taxed at 4.5 percent. Single taxpayers who earn more than $11,000 fall within the 5.25 percent bracket, while those who earn more than $13,000 should expect to pay 5.9 percent taxes on these earnings. Those with an income exceeding $20,000 fall within the 6.45 percent tax bracket, while taxpayers earning more than $75,000 fall within the 6.65 percent bracket. The tax rate rises to 6.85 percent for earnings in excess of $200,000, and increases once again to 8.82 for those earnings more than $1,000,000.
Tax brackets for married taxpayers are identical to those for single filers, but the income threshholds are doubled. For example, married couples earning more than $22,000 fall within the 5.25 percent bracket, while those earning more than $2,000,000 fall within the 8.82 percent bracket. The only exception to this rule lies with the 6.85 percent bracket. While this tax rate applies to single filers earning more than $200,000, it applies to married couples earning $300,000 or more.
The Tax Foundation ranks New Jersey and New York as the states with the highest tax burdens in the United States in 2012. Nationwide, residents pay an average of 9.8 percent of their income to state and local taxes. New Jersey has the highest income tax burden in the country, with residents paying an average of 12.2 percent of their income to state and local income taxes. New York follows close behind, at 12.1 percent.
While New York and New Jersey have similar income tax rates, the tax burden on low-income residents is much lower in New Jersey than in New York. For example, a single filer earning $25,000 in New Jersey falls within the 3.5 percent tax bracket, while the same taxpayer in New York would fall within the 6.45 percent bracket.
- New York State Department of Taxation and Finance: Summary of Personal Income Tax Changes Enacted in Extraordinary Legislative Session
- State of New Jersey Department of the Treasury: Tax Rates
- Tax Foundation: New York
- Tax Foundation: New Jersey
- Tax Foundation: State Individual Income Tax Rates, 2000-2012
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