I'm a NY resident with a NJ employer. Do I need to declare capital gains in my NJ tax return if I have already declared that on my NY returns?

[jlin22]

Also, should I be declaring that my interest and dividends are sourced from NJ instead of NY (even though I am physically working in NY)?

[RaifH · Accepted solution]

No, assuming the capital gains were from a sale of anything besides New Jersey real estate. If you reside in NY, you do not need to report your capital gains to NJ. This is considered unearned income and is reported to your resident state. 

[jlin22]

On the Turbotax screen, while filing for state returns, under New Jersey, I will have to declare "Yes, I earned all my wages in NJ" even though I am physically working in New York? My employer is based in NJ.

[ErnieS0]

You may not have to declare that you earned all your wages in NJ. It depends whether you were forced to work from home or did so for your own convenience.

During the coronavirus pandemic, New Jersey kept in place pre-COVID-19 tax arrangements with regards to employee residency even if an employee was working from home in a different state. Meaning, a New York resident who worked in a NJ office but was forced to work from home was considered to still be "working in NJ" and subject to NJ tax.

NJ changed its rules on September 30. See Teleworking – End of COVID-19 Temporary Suspension Period for Nexus and Withholding Purposes.

The state still follows the "convenience of the employer" rule. You are still liable for NJ tax after September 30 if you are working from home our of choice and not for any business purpose.

Check you W-2 to see whether your NJ Box 16 wages are 100% of your income.

[jlin22]

Thank you. My box 16 wages from NY is equal to the wages in Box 1. However, the NJ number is higher than the NY number. Box 18's number is also equivalent to Box 1 (and my NY wages). What does that mean then?

[LenaH]

The reason your New Jersey wages are larger than your federal wages is because New Jersey taxes several items that are excluded for federal and New York State purposes. Consequently, the state wages on your W-2, Box 16, are higher than Box 1. 

Some of the most common ways New Jersey does not follow federal tax law are:

• New Jersey does not exclude from tax any cafeteria plans, such as Flexible Spending Accounts (FSAs), Health Savings Accounts (HSAs) and Dependent Care Assistance Plan (DCAP).
• New Jersey does not exclude salary deferrals to retirement plans (other than to 401(k) plans). 

The above items are excluded from federal wages, but are added back to New Jersey state wages. This makes the New Jersey wages higher than the federal wages and the New York wages. 

@jlin22