Working remotely: taxes for NYC / NJ / Phila

[deceline]

I am employed by a company in NYC but am working remotely during the COVID situation. I'm trying to understand how my taxes are affected by working in a different state.

1) Would somebody be able to point me in the correct direction in regards to which state and/or city taxes I should anticipate responsibility for?

2) I'm comparing whether it would be advantageous to work remotely from Philadelphia or from a New Jersey suburb. I know Philadelphia has city wage taxes, but am I affected by those if my employer is in NYC? Is there a clear, comparable tax rate for Philadelphia city residence vs. New Jersey? (given that my employer is in NYC -- does this matter?)

Thanks for any input and apologies if this seems elementary; I've never been in a multi-layered sort of tax situation like this before.

[TomD8]

To answer your question correctly, we need to the state where your main, primary home (your domicile in tax terminology) is located.

[deceline]

Hi Tom! Thanks for replying - I am weighing an option to move, but I'm currently residing in Philadelphia, PA.

I just wanted to compare the outcomes of staying put vs. moving to New Jersey until my NYC officeplace reopens and I'd be expected to return to the city.

[TomD8 · Accepted solution]

The Philadelphia wage tax is imposed on anyone who lives in or works in Philadelphia.  The current tax rate on Philadelphia residents is 3.8712%.

https://www.phila.gov/services/payments-assistance-taxes/income-taxes/earnings-tax-employees/

ALL the income of PA residents is subject to the PA state income tax.  The current rate is 3.07%.

NJ has a graduated income tax.  The rate varies from 1.4% to 10.75%, depending on your filing status and adjusted gross income.  If you become a resident of NJ, all your income becomes subject to NJ state income tax.  The city of Newark, NJ, imposes a 1% city income tax.  As far as I can tell from a Google search, it is the only NJ city with an income tax.

https://www.state.nj.us/treasury/taxation/taxtables.shtml

Income earned from work performed in NY by a non-resident of NY is subject to both NY state income tax and the taxpayer's home state income tax.  This includes the income of NY non-residents who work remotely outside NY for their own convenience rather than that of the employer.  This is known as the "convenience of the employer" doctrine.  It is unclear at present how Covid will affect this rule, if at all.  A taxpayer in this situation may take a credit on his home state return for the tax paid to NY on the income taxed by both states.

[deceline]

Thank you, Tom, for making this really digestible. I appreciate you pulling these details together 🙂