You live in NY and file a NY resident return which means NY taxes all income. Your resident state taxes all income but gives a credit for income double taxed by another state. Please carefully follow these directions to prepare the states in a special order. You may need to delete both states and begin again.
- First, prepare your non-resident NJ return. This creates your tax liability for the non-resident state. How do I file a nonresident state return? Your NJ return only has your NJ wages.
- Then prepare your resident state NY return and it will generate a credit for your income already being taxed in the non-resident state. All wages and income.
- The credit will be the lower of the state tax liabilities on the same taxable income. You may owe your resident state, if they have a higher tax rate along with differences in how the taxable income is calculated. NJ is very different in the way they calculate taxable income.
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