How Living in an Expensive City Cuts Your Tax Credits
You expect some costs to be higher in places like New York, Los Angeles or San Francisco. Rent, food, gas – the list goes on. But there is another financial downside to living in a city with a higher cost of living: your tax credits may end earlier.
As the personal finance site Living Rich Cheaply explains, when you live in an expensive city, your income is usually higher to offset the cost of living. However, it also means that you will reach certain tax thresholds faster:
When you file your tax return, there are loans and deductions for various things, such as student loan and childbirth interest, however these loans and deductions are phased out and canceled altogether on certain income. Presumably, the reason for cutting off a tax credit or deduction at a certain income limit is that the person earns enough money, and the benefit is for those who earn less. It makes sense, but when you live in an area with a high cost of living and your basic living expenses are much higher, you may not be able to take advantage of these tax breaks, even if you may not be as financially well off as your colleagues. in a lower cost of living space.
As noted in the article, this also happens when applying for financial assistance. The amount of assistance you can get depends on your income, but does not take into account how much of your income is compensated if you live in an area with a higher cost of living.
Of course, there are usually more job opportunities in these areas and there are other factors to consider. You can think of it this way: it’s just another expense that your higher paying job should make up for. There is a lot to think about, however, beyond the obvious cost of living. To find out more on this topic, skip to the full article below.
The Hidden Costs of Living in a High Cost of Living Space | Living richly cheaply