NJ, like most states, taxes residents on all income regardless of where earned.
The issue that occurs when a taxpayer also files in another state and pays tax to that state as a nonresident, there is the "double" tax on the same income; nonresident state and state of residence.
States adjust for this by providing a credit for taxes paid in other states. It is not always $1 for $1, but not completely double taxed. New Jersey provides for this as well and you will see that on page 30 of the instructions for your NJ-1040.
https://www.state.nj.us/treasury/taxation/pdf/current/1040i.pdf
Since you have a loss, there is no double tax and you just reduce your NJ tax by the loss on the K-1.
Line 21 of the tax return states to attach a copy of the federal K-1. Not sure how TT handles this if at all.
You have two options:
- Efile which most likely will not include a copy of the K-1. You may receive a notice to send a copy in to NJ in order to finalize the processing (and you may not get a notice)
- Paper file the return and include a copy of the federal K-1
*A reminder that posts in a forum such as this do not constitute tax advice.
Also keep in mind the date of replies, as tax law changes.
