Comparison•2025 Tax Year•Last verified: January 2026
New Jersey vs Pennsylvania: Side Hustle Tax Comparison 2025
Compare New Jersey and Pennsylvania taxes for freelancers and gig workers. PA's flat 3.07% beats NJ's rates up to 10.75% - see your potential savings.
New Jersey and Pennsylvania share a long border, and many residents commute between these states daily. For side hustlers in the Philadelphia metro area or along the NJ-PA corridor, choosing where to live can significantly impact your tax bill.
Pennsylvania has one of the lowest flat tax rates in the nation at just 3.07%, while New Jersey's progressive rates can reach 10.75%. For freelancers, this difference—combined with NJ's notoriously high property taxes—makes Pennsylvania an attractive alternative.
**Why This Comparison Matters:**
The NJ-PA border sees significant cross-state movement:
- **3.07% vs up to 10.75%**: Pennsylvania's flat rate is dramatically lower
- **Philadelphia metro**: Easy access to both states from the same metro area
- **Property tax relief**: PA's property taxes average 1.36% vs NJ's nation-leading 2.23%
- **Cost of living**: Pennsylvania is significantly cheaper overall
- **Similar access**: Both states offer access to NYC, Philly, and major job markets
For side hustlers, living in Pennsylvania while serving NJ/NYC clients could mean saving 3-7% on state income taxes.
Side-by-Side Tax Comparison
| Metric | New Jersey | Pennsylvania |
|---|---|---|
| State Income Tax Rate | 1.4% - 10.75% (progressive) | 3.07% (flat) |
| Common Rate for Side Hustlers | 5.525% - 6.37% | 3.07% |
| Local Income Tax | None | 0-3.75% (varies by locality) |
| Federal SE Tax | 15.3% | 15.3% |
| Est. Tax on $15K Side Hustle* | ~$6,254 | ~$5,885 |
| Annual Savings (PA vs NJ)* | — | ~$369 |
| Property Tax (Avg Rate) | 2.23% | 1.36% |
| Sales Tax | 6.625% | 6% |
| Property Tax on $400K Home | ~$8,920/year | ~$5,440/year |
*Assumes single filer with $60,000 W-2 income + $15,000 net side hustle income. Actual taxes vary based on deductions, filing status, and total income.
New Jersey Analysis
**New Jersey Tax Analysis for Side Hustlers**
New Jersey has a progressive income tax with rates that climb steeply, plus the highest property taxes in the nation.
**Key New Jersey Tax Facts (2025):**
- **Tax Type**: Progressive (7 brackets)
- **Rate Range**: 1.4% to 10.75%
- **Common Side Hustler Rate**: 5.525% to 6.37%
- **Top Rate Threshold**: $1 million+
- **Property Tax**: Highest in US (2.23% average)
**Example**: If you earn $65,000 from your W-2 job and $15,000 from side hustle income (net of expenses) in New Jersey:
- Federal SE Tax: ~$2,124
- Federal Income Tax on side income: ~$3,300
- NJ State Tax: ~$830
- **Total Tax on Side Hustle: ~$6,254** (41.7% effective rate)
New Jersey offers proximity to NYC and strong public transit, but the combined income and property tax burden is among the highest in the nation.
Pennsylvania Analysis
**Pennsylvania Tax Analysis for Side Hustlers**
Pennsylvania has a flat 3.07% income tax rate—one of the lowest in the nation and dramatically simpler than New Jersey's system.
**Key Pennsylvania Tax Facts (2025):**
- **State Income Tax**: 3.07% flat rate
- **Tax Type**: Flat (same rate for all income)
- **Local Income Tax**: Some PA localities add 1-3%+ (Philadelphia: 3.75%)
- **Filing**: Simple with flat rate
**Example**: Same scenario—$65,000 W-2 job and $15,000 from side hustle income (net of expenses) in Pennsylvania (outside Philadelphia):
- Federal SE Tax: ~$2,124
- Federal Income Tax on side income: ~$3,300
- PA State Tax: ~$461
- **Total Tax on Side Hustle: ~$5,885** (39.2% effective rate)
**Savings vs New Jersey: ~$369/year** on $15,000 of side hustle income.
Note: Philadelphia residents pay an additional 3.75% city wage tax, which would flip this comparison. Suburbs outside Philly get the full PA advantage.
Calculate Your Side Hustle Taxes
Use our calculator to see exactly what you'd owe in each state. Try entering your numbers, then switch between New Jersey and Pennsylvania to compare.
Which State Is Right for Your Side Hustle?
**New Jersey May Be Better If You:**
- Need quick access to NYC (NJ Transit, PATH)
- Work in industries centered in northern NJ (pharma, finance)
- Already own property with established tax basis
- Value NJ's stronger public schools in some districts
- Plan to rent (property taxes less directly impactful)
**Pennsylvania May Be Better If You:**
- Want the lowest possible state income tax rate
- Plan to buy a home (huge property tax savings)
- Can work remotely or commute to Philly area
- Live outside Philadelphia (avoid city wage tax)
- Want lower overall cost of living
**Important Considerations:**
1. **Philadelphia changes everything**: Philly's 3.75% wage tax makes it worse than NJ for income tax. The PA advantage is strongest in the suburbs.
2. **Property taxes are the bigger difference**: On a $400,000 home, you'd save ~$3,480/year in PA vs NJ. Over 10 years, that's $34,800.
3. **Local taxes in PA vary**: Some PA townships have local income taxes (usually 1-2%). Check your specific location.
4. **Commute considerations**: If working in NYC, NJ has better transit options. PA commutes to NYC are longer.
5. **No reciprocity issues**: PA and NJ have tax reciprocity—you pay taxes where you live, not where you work. Your side hustle income is taxed by your home state regardless of client location.
Frequently Asked Questions
How much will I save living in Pennsylvania vs New Jersey?
For income tax alone, the savings are moderate: roughly $350-500/year on $15,000-$20,000 of side hustle income. However, the property tax savings are enormous—$3,000-4,000+ per year on a typical home. Combined, Pennsylvania can save you $3,500-4,500+ annually compared to New Jersey.
What about Philadelphia's wage tax?
Philadelphia residents pay a 3.75% wage tax on all earned income, which is higher than NJ's rates for most side hustlers. If you're considering PA, live in the suburbs outside Philadelphia city limits to get the full 3.07% flat rate benefit.
Do I pay taxes where I live or where my clients are?
PA and NJ have a reciprocal tax agreement—you pay income tax to your state of residence, not where you work or where your clients are. If you live in PA and have NJ clients, you pay PA taxes. This makes the comparison straightforward for freelancers.
Related Comparisons
Sources
- • New Jersey Division of Taxation - 2025 Tax Rates
- • Pennsylvania Department of Revenue - 2025 Tax Rates
- • Philadelphia Department of Revenue - Wage Tax
- • IRS Publication 334 - Tax Guide for Small Business
- • Tax Foundation - State Tax Data 2025