People change jobs for a wide variety of reasons, including a higher salary, better opportunities, family concerns or a desire to relocate, among others. If you’re contemplating a new job, it’s important to consider whether the situation will also come with new expenses, so that you can understand how much money will actually be left in your pocket.
Here are some issues to think about when evaluating the dollar value of a new career opportunity.
You got a job right after college at a company close to your home. Now, you’ve been offered a new position at a larger company in a city about an hour away. In making any decision that involves a new location be sure to factor in the costs of commuting, including gas, tolls, parking and car maintenance or public transportation fees.
“Many cities impose a city wage tax,” advises Associate Partner Julie Strohlein, CPA, “So consider how this would reduce your take-home pay as well. If the city is over a state border (such as Philadelphia and the neighboring South Jersey suburbs) you should find out whether or not you will need to file state tax returns in both your state of residence and your state of employment.”
If you’re going to pull up stakes and move to a new location, there are also a variety of expenses to consider. They include not only moving costs, the price of new furniture or appliances and any fees related to renting a new home or taking on a new mortgage, but also potential hikes in state and local taxes. If you will have to break a lease or sell your home, take those expenses into account, too. There are tax deductions available in some cases if you move for a new job, so ask your CPA for details on whether you qualify.
“There are rules about how far the new job is from your former residence and how long you must work in the new location. Make sure you understand these fully before claiming any deduction,” Julie recommends.
Finally, will the prices you’re used to paying for everyday expenses be the same? Use online cost-of-living calculators to find out if there will be a difference in day-to-day expenses in your new location.
Employers currently have up to 90 days to begin a new worker’s health insurance coverage. If your coverage under your former employer’s plan ends immediately or soon after you leave, that means there could be a gap in your insurance coverage between the time your new employer’s insurance kicks in and the old company’s coverage ends. You may need to buy interim insurance to bridge that gap. Talk to the human resources staff at your current and new employers to find out about the timing details of their policies so that you can plan ahead to make sure you and your family aren’t left without insurance coverage. If you will have to pay for interim coverage, find out how much it will be so you can factor the cost into your planning. You’ll want to know, too, if the cost of your insurance coverage will rise with a new employer, as well as any other changes in benefits that you can expect.
If the new job does come with a longer commute or longer hours, that may make it more tempting to pick up coffee, breakfast, lunch and even dinner on the run. Splurging a few dollars a day on takeout doesn’t seem like much, but if you spend just $10 a day, five days a week on eating out, it will drain $2,600 a year from your checking account. Consider how any small changes could affect your budget.
Your paycheck might not be the only form of compensation you are receiving. According to Julie, another area to consider is your retirement planning. Compare the employers’ contributions to each retirement plan when evaluating a change of job. A relatively small employer contribution could grow significantly over time. If the new employer contributes less than the former or nothing at all, earning a higher annual salary may not give you the most money in the end.
Every day, local CPAs offer clients expert advice on a wide variety of financial concerns, including making a major purchase or obtaining a loan. Whatever your financial and tax questions, your South Jersey CPA can help you find the answers.
Contact us for tax planning guidance and more information →
© 2017 Money Matters are provided by the American Institute of Certified Public Accountants.
Empowering business owners and individuals in South Jersey and Philadelphia to feel confident through proactive accounting and advisory solutions.
