Moving to NYC, self-employed, with a kid. How big will my tax hit be?

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jks1985
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Moving to NYC, self-employed, with a kid. How big will my tax hit be?

Post by jks1985 » Sun Oct 07, 2018 5:45 pm

None of the calculators I see online really take the unincorporated business tax into consideration when determining how much money you'll pay in income taxes.

I'm hoping somebody with experience living in NYC as a business owner / self-employed individual can help me out.

- Let's say I make 300k per year, and am married filing jointly.
- I will max out my 401k (50k~). Wife is stay at home mom without retirement plan.
- I will also max contributions to the NYS 529 plan ($10k can be deducted, right?)?

That part I can calculate, but then it gets tricky factoring in the unincorporated business tax in addition to the new Trumptax/pass through income deduction.

Anybody have an estimate of my income tax burden? Or any place I could go to learn more about it?

Thanks!

Mike83
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Re: Moving to NYC, self-employed, with a kid. How big will my tax hit be?

Post by Mike83 » Sun Oct 07, 2018 6:38 pm

I wish I could help. When faced with the same decision, I left NY for Florida and never looked back

better schools
no state taxes
better housing choices (you have a family)
better commute
more diversity in the population, both ethnic and social philosophy
better college prepay options
easier living
lower carbon footprint
nicer people (even if mostly ex ny-ers)
almost zero business nuisance
polite and helpful state agency employees
50% lower neurotic behavior
no bodily fluids on the sidewalk
two hour flight to LaGuardia

no brainer if you are in a service profession that does not require >180 day per year physical presence in NY.

jks1985
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Re: Moving to NYC, self-employed, with a kid. How big will my tax hit be?

Post by jks1985 » Sun Oct 07, 2018 8:42 pm

Yeah, I get all of that. That's why I moved down here to Texas. Unfortunately, it's just not for me. All my friends are in NYC, and my family is all in the NYC/Boston area. And frankly, I just miss the city life.

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dodecahedron
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Re: Moving to NYC, self-employed, with a kid. How big will my tax hit be?

Post by dodecahedron » Sun Oct 07, 2018 8:53 pm

jks1985 wrote:
Sun Oct 07, 2018 5:45 pm
- I will also max contributions to the NYS 529 plan ($10k can be deducted, right?)?
Yes, on a joint return you can deduct up to $10K per year in NYS 529 contributions from your income subject to NYS & NYC personal income tax. However, the deduction will not change your federal income tax nor your unincorporated business income tax.

nyclon
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Re: Moving to NYC, self-employed, with a kid. How big will my tax hit be?

Post by nyclon » Sun Oct 07, 2018 8:59 pm

You could call a CPA in the city and get a forecast for a few hundred $. May be worth it.

aqan
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Re: Moving to NYC, self-employed, with a kid. How big will my tax hit be?

Post by aqan » Sun Oct 07, 2018 9:04 pm

looks like you've decided to move anyway so how does it matter what the tax hit will be.. IMHO the cost of living will be much bigger hit than the tax hit.

jks1985
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Re: Moving to NYC, self-employed, with a kid. How big will my tax hit be?

Post by jks1985 » Mon Oct 08, 2018 9:57 am

aqan wrote:
Sun Oct 07, 2018 9:04 pm
looks like you've decided to move anyway so how does it matter what the tax hit will be.. IMHO the cost of living will be much bigger hit than the tax hit.
That's true, but the extra cost of living I can accept. I live frugally wherever I go. I just don't like the high income taxes of the city and want to do whatever I can to lower them.

As for cost of living expenses:
- Health insurance costs will be the same. ($800~ month for my family of three)
- Rent will double. It will go up to about $4000/month.
- I'll sell my car for about 15k. It will also free up about $250/month in insurance, gas, and parking costs. But that will be a wash because MTA costs will be $200~ month for my family.
- Grocery bill will nearly double.
- I'll save about $4000 a year in plane tickets home for Christmas, Thanksgiving, Easter, weddings, funerals, etc.

So, that will be about an extra $25k a year in cost of living expenses.

And depending on how much tax I have to pay, could be an extra 20-60k per year in taxes. I'm just trying to understand it better. If it's 30k a year in taxes I'll be able to bite the bullet. If its 60k+, I might have to think twice.

craiggsean
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Re: Moving to NYC, self-employed, with a kid. How big will my tax hit be?

Post by craiggsean » Mon Oct 08, 2018 10:11 am

As for cost of living expenses:
- Health insurance costs will be the same. ($800~ month for my family of three)
How is insurance costs so low for a family when your income doesn't qualify for a subsidy?
Please share with self-employed folks who are at a tight spot.

Also in NY, you have many housing options outside the city - LI, NJ, Westchester, CT, etc.
What kind of schooling are you planning for your children?
Public, private, home, etc. would help you with the decision on location and taxes.

jks1985
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Re: Moving to NYC, self-employed, with a kid. How big will my tax hit be?

Post by jks1985 » Mon Oct 08, 2018 3:47 pm

craiggsean wrote:
Mon Oct 08, 2018 10:11 am
As for cost of living expenses:
- Health insurance costs will be the same. ($800~ month for my family of three)
How is insurance costs so low for a family when your income doesn't qualify for a subsidy?
Please share with self-employed folks who are at a tight spot.

Also in NY, you have many housing options outside the city - LI, NJ, Westchester, CT, etc.
What kind of schooling are you planning for your children?
Public, private, home, etc. would help you with the decision on location and taxes.
It's just a hair over $800 for me, my wife, and my newborn. It was $600 for us before the baby. We get a bronze plan from the exchange.

Edit - holy smokes. The cheapest bronze plan in NYC is $1300/month. Guess it's gone up a ton since I left 3 years ago. I guess that's another strike against NYC.
Last edited by jks1985 on Tue Oct 09, 2018 10:26 pm, edited 1 time in total.

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tennisplyr
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Re: Moving to NYC, self-employed, with a kid. How big will my tax hit be?

Post by tennisplyr » Mon Oct 08, 2018 6:15 pm

This site might be good to search/ask questions:

http://www.city-data.com/forum/new-york-city/
Those who move forward with a happy spirit will find that things always work out.

jks1985
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Re: Moving to NYC, self-employed, with a kid. How big will my tax hit be?

Post by jks1985 » Mon Oct 08, 2018 6:36 pm

Thanks for the suggestion. I just did that.

aqan
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Re: Moving to NYC, self-employed, with a kid. How big will my tax hit be?

Post by aqan » Mon Oct 08, 2018 9:33 pm

jks1985 wrote:
Mon Oct 08, 2018 9:57 am
aqan wrote:
Sun Oct 07, 2018 9:04 pm
looks like you've decided to move anyway so how does it matter what the tax hit will be.. IMHO the cost of living will be much bigger hit than the tax hit.
That's true, but the extra cost of living I can accept. I live frugally wherever I go. I just don't like the high income taxes of the city and want to do whatever I can to lower them.

As for cost of living expenses:
- Health insurance costs will be the same. ($800~ month for my family of three)
- Rent will double. It will go up to about $4000/month.
- I'll sell my car for about 15k. It will also free up about $250/month in insurance, gas, and parking costs. But that will be a wash because MTA costs will be $200~ month for my family.
- Grocery bill will nearly double.
- I'll save about $4000 a year in plane tickets home for Christmas, Thanksgiving, Easter, weddings, funerals, etc.

So, that will be about an extra $25k a year in cost of living expenses.

And depending on how much tax I have to pay, could be an extra 20-60k per year in taxes. I'm just trying to understand it better. If it's 30k a year in taxes I'll be able to bite the bullet. If its 60k+, I might have to think twice.
These decisions are mostly made to satisfy emotional needs and usually your financial needs take the back seat. I think you'll be happier close to the family as long as you keep making the same amount of money in NYC.

This should give you some idea of what you're in for. IMO you're looking at 3-5% hit on your total income depending upon how much you can put away in your tax sheltered accounts.

https://smartasset.com/taxes/new-york-t ... fjP2c1UucS

jks1985
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Re: Moving to NYC, self-employed, with a kid. How big will my tax hit be?

Post by jks1985 » Tue Oct 09, 2018 2:40 pm

I agree it's mostly an emotional decision. I have friends who love NYC so much that they wouldn't consider living anywhere else. They'd live there no matter how much it cost. I'm not quite at that level, but it certainly is my favorite place to live in the country. The high COLA and taxes just scare me. I did the downtown Jersey City thing for a year, but it just wasn't the same. The part I like about NYC is being able to walk out your door and have the city at your doorstep. Living in Jersey and needing to take the PATH for 30 minutes or paying $13 to drive thru the tunnel just sucked.

money_bunny
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Re: Moving to NYC, self-employed, with a kid. How big will my tax hit be?

Post by money_bunny » Tue Oct 09, 2018 3:39 pm

jks1985 wrote:
Tue Oct 09, 2018 2:40 pm
Living in Jersey and needing to take the PATH for 30 minutes or paying $13 to drive thru the tunnel just sucked.
Same with Fort Lee.

Though I wonder how much you need to make to have NJ residency offsetting the NYC city tax make the commute worth it. Never did that calculation myself. I had a friend in Finance move to the border of Jersey City/Hoboken from Manhattan because she said she saved many thousands of dollars by making the move across the river.

bsteiner
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Re: Moving to NYC, self-employed, with a kid. How big will my tax hit be?

Post by bsteiner » Tue Oct 09, 2018 3:46 pm

See page 8 of the instructions to the estimated tax forms for the NYS and NYC income tax rates: https://www.tax.ny.gov/pdf/2015/inc/it2105i_2015.pdf.

The NYC unincorporated business tax is 4%.

VaR
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Re: Moving to NYC, self-employed, with a kid. How big will my tax hit be?

Post by VaR » Tue Oct 09, 2018 4:49 pm

If you did your taxes on TurboTax last year, it might be worth buying the NY State edition and seeing how you would have done if you were a NYC resident. I figure this isn't an option, though, because with such a big business you had your taxes done by an outside preparer.

jks1985
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Re: Moving to NYC, self-employed, with a kid. How big will my tax hit be?

Post by jks1985 » Tue Oct 09, 2018 6:17 pm

VaR wrote:
Tue Oct 09, 2018 4:49 pm
If you did your taxes on TurboTax last year, it might be worth buying the NY State edition and seeing how you would have done if you were a NYC resident. I figure this isn't an option, though, because with such a big business you had your taxes done by an outside preparer.
Yeah, I had an accountant do them for me.

I'll probably just pay an accountant from NYC a hundred or two to get a real estimate.

jks1985
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Re: Moving to NYC, self-employed, with a kid. How big will my tax hit be?

Post by jks1985 » Tue Oct 09, 2018 6:19 pm

money_bunny wrote:
Tue Oct 09, 2018 3:39 pm
jks1985 wrote:
Tue Oct 09, 2018 2:40 pm
Living in Jersey and needing to take the PATH for 30 minutes or paying $13 to drive thru the tunnel just sucked.
Same with Fort Lee.

Though I wonder how much you need to make to have NJ residency offsetting the NYC city tax make the commute worth it. Never did that calculation myself. I had a friend in Finance move to the border of Jersey City/Hoboken from Manhattan because she said she saved many thousands of dollars by making the move across the river.
Well, if my calculations are correct, which they probably aren't, I'd save about 10% of my income by living in Jersey. NJ state income taxes are something like 5%. NYS/NYC/UBT taxes would be 15%.

seawolf21
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Re: Moving to NYC, self-employed, with a kid. How big will my tax hit be?

Post by seawolf21 » Tue Oct 09, 2018 7:26 pm

jks1985 wrote:
Tue Oct 09, 2018 6:19 pm
money_bunny wrote:
Tue Oct 09, 2018 3:39 pm
jks1985 wrote:
Tue Oct 09, 2018 2:40 pm
Living in Jersey and needing to take the PATH for 30 minutes or paying $13 to drive thru the tunnel just sucked.
Same with Fort Lee.

Though I wonder how much you need to make to have NJ residency offsetting the NYC city tax make the commute worth it. Never did that calculation myself. I had a friend in Finance move to the border of Jersey City/Hoboken from Manhattan because she said she saved many thousands of dollars by making the move across the river.
Well, if my calculations are correct, which they probably aren't, I'd save about 10% of my income by living in Jersey. NJ state income taxes are something like 5%. NYS/NYC/UBT taxes would be 15%.
NJ has higher property tax than NYC. If you make >$100K, definitely look into moving out of NYC. The savings from not paying NYC income starts to offset increases in property tax. The higher your taxable income, the more advantageous it is to move out of NYC.

If you did your prior taxes with software, just re-run it as a NYC resident.

jks1985
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Re: Moving to NYC, self-employed, with a kid. How big will my tax hit be?

Post by jks1985 » Thu Oct 11, 2018 9:42 am

Unfortunately, I didn't do them with any tax software. My accountant might have, I'll have to ask him.

I’m just trying to get a feel for how much I’ll have to pay in taxes. I live in Texas now and pay 2k/month for rent, 800 for health insurance, and 0% state income tax. Based on my current calculations, between higher rent, higher taxes, and higher health insurance, it will cost me $80,000 more per year to live in NYC. I’m just trying to see if I’m missing anything. 80k more per year is a tough swallow. If it was 40k more per year, then I’d be able to bite the bullet.

flarf
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Re: Moving to NYC, self-employed, with a kid. How big will my tax hit be?

Post by flarf » Thu Oct 11, 2018 10:10 am

I don't think you're missing anything. NYC is expensive. Those with higher incomes will pay over 50% tax (fed/state/city/Medicare).

The tax tables and calculators linked earlier should give you an accurate view of the personal income tax burden. The unincorporated business tax is 4% of taxable income, but there are various deductions and credits available, see here: http://www.sher-cpa.com/new-york-citys- ... st-pay.php

There is no financial argument for living in NYC, unless being here means you can make more money. If that's not the case, then it's strictly a question of how much you value city life.

jks1985
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Re: Moving to NYC, self-employed, with a kid. How big will my tax hit be?

Post by jks1985 » Thu Oct 11, 2018 10:40 am

flarf wrote:
Thu Oct 11, 2018 10:10 am
I don't think you're missing anything. NYC is expensive. Those with higher incomes will pay over 50% tax (fed/state/city/Medicare).

The tax tables and calculators linked earlier should give you an accurate view of the personal income tax burden. The unincorporated business tax is 4% of taxable income, but there are various deductions and credits available, see here: http://www.sher-cpa.com/new-york-citys- ... st-pay.php

There is no financial argument for living in NYC, unless being here means you can make more money. If that's not the case, then it's strictly a question of how much you value city life.
That table is great. Thanks man!

jks1985
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Re: Moving to NYC, self-employed, with a kid. How big will my tax hit be?

Post by jks1985 » Fri Nov 16, 2018 1:16 pm

Got an email from my accountant with some useful information.
Moving to NYC, you will have to pay the following taxes for self-employed:
1. NYS - about 6.85%
2. NYC - about 3.8%
3. MCTMT (Metropolitan Commuter Transportation Mobility Tax) - about 0.11% to 0.34%
4. UBT - about 4%

Possible deduction for self-employed:
1. maximum 401k contribution $55,000 for 2018
2. self-employed Health, Dental, Vision insurance
3. the 20% Qualified Business Income (QBI) deduction is only to lower your federal income and not for NYS/NYC
4. up to $10,000 is deductible annually to the NYS 520 plan to lower your NY income only.

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