I make $75,000 a year. Would it be cheaper to live in Pennsylvania and work in Pennsylvania or live in Pennsylvania and work in Delaware? I’m thinking in terms of the income tax difference in each state.
If you live and work in Pennsylvania, currently the tax on an income of $75,000 is $2,303. If you live in Pennsylvania and work in Delaware, the Delaware state income tax is $3,609. Living in Pennsylvania and working in Delaware will cost you an additional $1,300 in state income tax. However, if you lived in Pennsylvania and worked in Delaware, it is likely you would not need to pay additional Pennsylvania income tax because Pennsylvania allows a credit for taxes paid to other states (in this case, Delaware) for income it also taxes.
Depending on where you live in Pennsylvania and where you work in Delaware, there may also be local income taxes to consider. You can determine your local income tax rate for the municipality and school district you live in at the Pennsylvania Department of Community and Economic Development
. Living and working in different states can be complicated. You should contact a local tax professional to get a better sense of all taxes involved. To find a CPA by location and area of expertise, visit PICPA's CPA Locator
Answer By: David M. Lastowski, CPA, is the owner of David M. Lastowski, CPA, in Erie, Pa.
***Answer originally published Jan. 1, 2015.