I live in NJ but work in NY, should I be paying taxes from my pay to both states on every paycheck? I do not want to be double tax.

[s-maldonado26]

My company does not have a clue on what to, and right now I am only paying to NJ,  I do not want to owe a lot to NY when I file my taxes. 

[rjs]

Since you work in NY, you should be having NY tax withheld from your paycheck, and not NJ tax. Your pay for working in NY is fully taxable by NY. You will owe little or no tax to NJ because you will get a credit on your NJ tax return for a large portion of the tax that you pay to NY.

Don't worry about the NJ tax that has already been withheld this year. You will get it back when you file your tax returns at the end of the year. You won't be double taxed. But you should have your employer correct your withholding for the rest of the year, and do it as soon as possible. You should consider having extra NY tax withheld for the rest of this year, to make up for the NY tax that should have been withheld on what you already earned in NY this year. If you do that, make sure you remember to remove the extra withholding at the beginning of next year.

When you file your tax returns at the end of the year you will file a NY nonresident tax return and a NJ resident tax return. Prepare your NY nonresident return first, then your NJ resident return.

[thiagosrpt]

Hi RJS,

I came across your response and it makes sense. Do you know if filing a NY nonresident tax return and a NJ resident tax return can be done through turbo tax?

Thanks,

Thiago

[rjs]

@thiagosrpt  Yes, you can file a New York nonresident tax return and a New Jersey resident tax return with TurboTax.

[PJackson]

I'm aware of and understand the concept of paying the taxes first in NY and then receiving a credit for the taxes that would be asked for in NJ.

However, I'm wondering why -- if the amount I already paid in NY taxes exceeds the total NJ tax bill -- why is my “Other state tax credit” less than the NJ tax bill and why do I still owe money (even though the amount paid for NY exceeds the tax bill for NJ)?

[LindaB1993]

The difference is attributable to the tax rates applicable to each state.  Therefore, the allocation of the "other state credit" would be less that what was actually paid.

New Jersey Tax Brackets 2019 - 2020

Tax rate of 1.4% on the first $20,000 of taxable income. Tax rate of 1.75% on taxable income between $20,001 and $35,000. Tax rate of 3.5% on taxable income between $35,001 and $40,000. Tax rate of 5.525% on taxable income between $40,001 and $75,000.

New York State income tax rates range from 4% to 8.82% as of 2019, depending on a taxpayer's income. The lowest rate applies to the first $8,499 of taxable income for single filers, and it increases incrementally from there. The highest rate of 8.82% is applicable to incomes exceeding $1,077,550 for single taxpayers.

[TomD8]

@PJackson -- You may qualify for a credit if you paid income or wage tax on the same income in the same year to both New Jersey and to another jurisdiction outside New Jersey.  Your credit cannot be more than the amount you would have paid if you earned the income in New Jersey.

[rjs]

To expand on what TomD8 said, the credit is not supposed to be equal to your total NY tax, and probably will not be because NY rates are higher than NJ, as LindaB1993 pointed out. The credit is the amount of NJ tax that you would have paid on the income if it had been NJ income instead of NY income.

The following is from New Jersey Publication GIT-3W (page 2).

"This credit minimizes double taxation of income that is already taxed by other jurisdictions. Though the credit reduces your New Jersey Income Tax, you are not necessarily entitled to a dollar-for-dollar credit for the total amount of taxes paid to the other jurisdiction. The credit represents the amount of New Jersey Income Tax that you would have paid had the income been earned in New Jersey, or the amount of tax actually paid to the other jurisdiction, whichever is less."

For more details about the credit, you can download Bulletin GIT-3W from the following link.

GIT-3W, Credit for Income Taxes Paid to Other Jurisdictions (Wage Income)

[rahulp8622]

Hello,
I am in similar situation,  I work in NY and rent an apartment in NJ, I understand that I need to file NY state form as non- resident and NJ as resident. My question is for example NY state withheld suppose 6000$ from my paycheck in 2019, the same amount if I had earned in NJ the state tax would be for example 4500$, then after filing the above forms with both sates will I be getting back the difference of 1500$ [NY(6000) - NJ(4500) = 1500$] ?.  Can someone please clarify using the above example.
Thanks!!

[BillM223]

@rahulp8622

Please see rjs' last post.

I can't work with your example, because withholding is just an estimate and not what tax you are actually assessed on income. That is, the withholding could vary between the two states for reasons other than the calculations involved in determining the credit for taxes paid in other states.

To repeat what rjs said, if you have NY and NJ taxes assessed on the same income, then you will pay the NY tax, and get a credit for the tax paid to New York on your NJ return.

[Skyyy]

Hi, if I rent an apartment and live in NJ, and my office is in NY (but I am working from home), would it change the tax filing status?

Another question is: If I live in NJ but work in NY, when using Turbotax, do I need to purchase and download two states' package in order to file my tax? or I can just purchase and work with on state download?

Thank you!  

[ErnieS0]

No. Working from home does not change your status.

New Jersey and New York are keeping in place pre-COVID-19 tax arrangements with regards to employee residency even if an employee is working from home in a different state. So if you were working in NY pre-pandemic, you are still considered a NY employee and should have NY tax withheld from your tax.

New Jersey sourcing rules dictate that income is sourced based on where the service or employment is performed based on a day’s method of allocation. However, during the temporary period of COVID-19 pandemic, wage income will continue to be sourced as determined by the employer in accordance with the employer’s jurisdiction.

Learn more at Telecommuter COVID-19 Employer and Employee FAQ. See the section entitled Personal Income Tax.

You will need two states in TurboTax to file a non-resident New York return and a resident New Jersey return. NJ will give you credit for tax paid to NY.

Learn more at How do I file a nonresident state return?

[Lilahgwen]

Same issue.

Last summer, (year 2020), my job taxed me in my resident state New Jersey because was telecommuting temporarily and was able to report to the New York office.

From my understanding, my wages are still considered  NY source income for the year. Regardless, if I was telecommuting. 

My W2, reports the allocated (prorated) Gross Wages for New York in the summary section.

Then in Box 16, the wages for New York, equals Federal wages for the entire year. 

Couple Questuons: 

(1) Should I request a new W2 from my company, to correct the Gross Wages in New York for the full year? Or would it work itself out when I file my returns because box 16 for NY wages is being reported the same as Federal, and just need to pay the additional taxes?

(2) Will I still be able to claim my NJ credit as a resident?

[ThomasM125]

You don't need to correct your W-2 if your wages belongs to New York. You still file a New Jersey tax return as a resident.

When you file your New York return, your total income will show up in New York as taxable, but once your tax is calculated, it can be reduced by a percentage of your income earned while out of state.

In New Jersey, you will get credit for any tax paid to New York. So, you won't get double taxed even though it may appear that way at first. 

[ecannan11]

In the majority of these cases do you wind up owing to NY? Example 2017 our gross income broke down to 70% earnings in NJ and 30% in NY. In 2018 it was about 50/50.