After Cost of Living
What a raise is worth once rent is subtracted.
A salary means nothing without the place it is spent in. Comparing two gross figures across two metros is the most common mistake in evaluating a job offer, and it is usually wrong by enough to reverse the decision.
The comparison that works
Two lines account for nearly all the variation between American metros: housing and state income tax. Groceries, utilities and services vary far less than people expect.
So the honest comparison is what is left after those two:
(gross − tax) − annual housing = the number to compare
An offer of $95,000 in a high-cost metro with no state income tax, against $80,000 somewhere with $1,400 rents and a 5% state tax, comes out only about $6,400 apart once housing and tax are subtracted — not the $15,000 the headline suggests. Shift the rent gap a little and the ranking reverses.
The 30% rule, and where it breaks
The convention is that housing should take no more than 30% of gross income. Reversed, it gives the salary a given rent requires:
annual rent ÷ 0.30 = salary needed
A $2,100 one-bedroom needs $84,000 on that rule. The same apartment shared needs $56,000 per person — a larger effect than any tax or salary difference between cities, and the lever most people underuse.
The rule predates current housing markets and assumes no unusual debt. Anyone carrying a student loan or a car payment is working from a smaller remainder, and lenders will measure them against a total debt ratio rather than a housing one anyway.
No income tax is not the same as cheap
Nine states levy no state income tax. At $85,000 that is worth roughly $3,500 to $4,500 a year against a state charging 5 to 6%.
Real money, and routinely overstated. Several of those states run high sales tax or high property tax instead, and a $700 monthly rent difference is $8,400 a year — roughly double the entire income tax saving.
What the rule does not cover
Saving. A budget that fits at exactly 30% housing with nothing left over has no capacity for a broken car, and in a high-cost metro that gap is where the stress actually lives — not in the rent itself.
6 articles
States With No Income Tax: Nine of Them, and the Saving Is Smaller Than It LooksNo income tax is worth two to five thousand dollars a year for most workers. A seven-hundred-dollar rent difference is worth more than that, and nobody advertises it.
Salary Needed to Live in California: $75K Inland, $110K in the Bay AreaCalifornia is not one cost of living. Fresno and San Francisco differ by more than most pairs of states, and quoting a single figure for the state is the mistake.
What Percentage of Income Should Go to Rent? 30% Is the Rule, and Where It BreaksThirty percent of gross income. It is a useful default and a poor rule, because it ignores debt, dependants and the fact that some costs do not scale with income.
Cost of Living Comparison Between Cities: Two Lines Do Almost All the WorkCost-of-living indexes average dozens of categories that barely vary and one that varies enormously. Subtract housing and tax, compare what is left, and ignore the index.
Salary Needed to Live in Seattle: Roughly $85K Alone, $135K With a FamilySeattle has no state income tax, which is worth a few thousand a year. Housing costs considerably more than a few thousand a year above the national median.
Is $60K a Good Salary? Comfortable in Most of America, Tight in Six MetrosSixty thousand is above the median wage for an individual American worker. Whether it is a good salary depends almost entirely on rent and on how many people it has to support.