It can be taxable in both states. The key is where the source of that income is (where the employer is situated). However your resident state will give you credit for any state tax you are required to pay to another state on the same income.
For state 2, North Carolina. This is your resident state when the money was received and therefore you must include it in full because you are required to report all of your worldwide income to your resident state. However, if the income must be reported on another state, then the resident state will give you credit for taxes paid on the same income.
New Jersey Rules: The state of New Jersey requires you to pay taxes if you are a resident or nonresident that receives income from a New Jersey source.
The credit for taxes paid to another state on the same income is used on your resident state because they do not want you to pay taxes twice on the same income. Complete the nonresident state return first then your resident state. This will allow TurboTax to do most of the work for you.
The credit for tax paid to another state on the same income will be the lesser of:
- the tax liability actually charged by the nonresident state, OR
- the tax liability that would have been charged by your resident state
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