Double Tax Credit: Part year resident of both NY and NJ. Earned all income in NY. How to claim the tax credit for income earned and taxed by NY as well as NJ as resident?

[santanu]

I and my wife both were part year residents of NY for 212 days and moved to NJ. We  both earned income in NY all year. Our W2 shows income that we earned while we were residents of NJ along with NY income. Now in NJ state tax return, we can calculate the income that is double taxed ( NJ income reported on W2). How to calculate the tax that NY collected for the NJ portion of the income? What formula to use?

[DMarkM1 · Accepted solution]

Use the NJ portion of income earned in NY divided by total NY taxable income.  That percentage multiplied by the total NY tax liability will be the NY tax on the NJ income portion (double taxed income).  

[santanu]

A follow up question: All my income is from NY source but I am part year resident of NY and NJ both. In my NY return do I need to allocate the NY source income in the proportion of number of days stayed in NY and NJ? Or I allocate 100% of NY income to NY?

[DMarkM1]

No.  On your NY return all (100%) of the income earned in NY whether resident or non-resident is NY source income and taxed by NY.    

[nj30]

@DMarkM1 - I have a similar situation.  I lived in NYC part year and based out of NY office, then moved to NJ and work office in NJ.  I primarily WFH and employer has offices in both NY and NJ.  Since the NJ move it seems that employer appropriately changed the state tax withholdings and only NJ taxes once the switch was made (from what I can tell looking at the paystub). 

For sake of example here are some sample numbers for discussion: 

NY - lived and worked Jan to Aug 2023.  Income - 60k, w2 shows 100k

NJ - lived and worked Sept to Dec 2023. Income - 40k, w2 shows 40k

A few questions: 

1. How do I know if I am double taxed and need to claim credit on the part yr resident form?

2. If I need to claim tax credit paid to another state do I claim that on my NJ form for any NY taxes paid or do that on the NY form?

[MarilynG1]

You will be able to adjust the Wages that belong on the Part Year Resident returns as you go through the State Interview screens.

TurboTax will take the W-2 amount, but you are allowed to indicate the correct amount of wages belonging to each state.

Go through the screens carefully; they are somewhat different for each state, but allow you to adjust income items like Wages, Interest, Dividends, etc. between the states you lived in during the year.

Here's more info on  Allocating Income for a Part-Year Resident.

[nj30]

@MarilynG1  - thanks. I am comfortable with going through those screens to allocate my income to the states separately.  Would you be able to help answer these two questions for me?

1. How do I know if I am double taxed and need to claim credit on the part yr resident form?

2. If I need to claim tax credit paid to another state do I claim that on my NJ form for any NY taxes paid or do that on the NY form?

[MarilynG1]

Both New Jersey and New York interviews will have an entry for 'Tax Paid to Another State' where you can indicate which state and how much.

Don't worry about being double taxed.  Of course, it's always advisable to look over your tax forms before filing. 

@nj30