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If it was a permanent move to VT, you file in both states as a part year resident. You will have to allocate income. Did you notify your employer that you moved to VT, did you intend on it being permanent? You will get a credit in VT for taxes paid on the 2nd half year of income paid to NJ. Depending on income levels. You will have to file 2 returns in NJ. http://www.state.nj.us/treasury/taxation/njit26.shtml one as resident and one as part year resident, see link.
NJ taxes telecommuting. CONVENIENCE VS. NECESSITY
In New York, Pennsylvania, Delaware, New Jersey and Nebraska, all wages earned from an employer in any of those states are allocated to that state unless by necessity the nonresident’s work must be performed from his or her out-of-state location. This rule has been enforced by the taxing authority in New York, legally challenged and upheld. So you will still owe taxes for non-resident NJ while living in VT.
If this was a temporary move and you intended always on returning to NJ you may qualify as a full year resident of NJ and a non-resident of Vermont. You would still owe taxes to both states. you would file full year resident of NJ and Non-resident in VT. Each state has different rules and you get credits for taxes paid to other states during period of residency in that state. YOU MUST finish the NON-resident return prior to doing the resident return!!!
VT law:
PART-YEAR RESIDENTIf you were a Vermont resident for only part of the tax year, you must do the following to determine whether you must file a Vermont income tax return:
Add the calculations resident and nonresident. If the sum is more than $100, you must file a Vermont income tax return.
I am not a TT employee. Please ask additional questions if this was not clear.
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