Because he worked in New York, his income is fully taxable to New York. It's also taxable to New Jersey since he lives there. However, to avoid double taxation, New Jersey will give him a credit for taxes paid to New York up to the amount of tax that would be paid in New Jersey. He won't get a refund from NJ for the difference.
In situations like this where you live in one state and work in the other, you will always pay the higher tax rate unless there's a reciprocity agreement between the states. For example, if the situation was flipped and he lived in New York and worked in New Jersey, he'd $22,500 to New Jersey and still owe the $3,500 to New York (because New York would still charge $26,000 and give a credit for $22,500). New York and New Jersey don't have tax reciprocity.
