Today TaxMama hears from Melissa in Massachusetts who tells us. “My husband will now be working in Connecticut and we live in Massachusetts. How will this affect our income? This move is supposed to be a promotion. Yet I wonder if the taxes will make that feel as if there were no bump in pay. Does he need to ask for a larger increase in salary to compensate for CT taxes?”
Congratulations on the promotion! You have excellent instincts. You’re right to be concerned.
Please, RUN to your tax professional, or find a good one.
Bring all the information about your husband’s new job along to the appointment. Also, bring a copy of last year’s tax return so the Tax Pro can make a sensible evaluation.
After all, if this is a permanent job, rather than a temporary assignment, if he gets an apartment there, you won’t even be able to deduct the travel expenses. CT will become his tax home. Or is the job close enough to home that he can simply commute directly over the state line (a few blocks away)?
As to the CT taxes, you’ll file a non-resident return to report your husband’s income there. CT has a lower tax than MA – only 5% compared to MA’s top rate of 5.3%. So you will get a credit on your Massachusetts tax return for taxes paid to Connecticut.
Have someone run the numbers for you. And also find out how much extra the tax preparation is going to cost. (Shouldn’t be much extra, really – say $75 – $100.) This is the time to negotiate any adjustments to compensation. But, be careful. Don’t make your husband look bad. Don’t nit-pick on small costs or inconveniences. The promotion and related raise is designed to cover that kind of thing.
And remember, you’ll find answers to lots of questions about working across state lines and other tax information, free. Where? At TaxMama.com[Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips. Please click on the subscribe link and join us.]
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