Live in NJ but only worked in PA in 2023, owing NJ taxes for the first time. Unsure why

[elliott00]

So I have a question. I live in NJ but only worked in PA in 2023. I only have one job and it was in PA and I didn't make any income in the NJ area. I am filing my taxes but it is stating that I owe about $600 to $700 dollars in NJ taxes. I am a full-time graduate student and I am paying school out of pocket towards tuition and have been a full time student since August 2021. I contribute to my job's 403b retirement fund at 15%. I also make payments towards my student loans and received a 1098-E regarding the principal interest I've paid. Compared to the previous two years, I made significantly less and have only made about 46k in the year 2023. I know NJ and PA have a reciprocity agreement. Despite these factors, I am unsure why I am being told that I owe NJ taxes?  Is there anyone that can help and explain this to me?  This is my first time owing taxes. 

[TomD8]

You owe NJ income tax because you're a resident of NJ.  Your resident state can tax ALL your income, regardless of where you earn it.

The NJ-PA reciprocity agreement simply means that a NJ resident who earns W-2 wages or salary in PA is taxed on that income only by their home state of NJ.

If you haven't already done so, submit PA Form REV-419 to your employer to declare exemption from PA withholding.  Here's a link to the form:

https://www.revenue.pa.gov/FormsandPublications/FormsforBusinesses/EmployerWithholding/Documents/rev...

If your employer mistakenly withheld PA taxes, you'll have to submit a non-resident PA tax return, on which you declare zero PA income, in order to obtain a refund.

[DMarkM1]

We cannot see your returns in this forum but you will owe taxes when the deductions and credits (including taxes withheld) on your tax return do not reduce your tax liability to zero. 

Generally, for NJ, from your NJ wages (W2, box 16) you will subtract a personal exemption (likely $1000), a $2500 deduction for NJ student loan payments, $10,000 for NJ tuition deduction and a property tax deduction based on your rent paid.  

From your post with $46K of NJ income there will be some remaining NJ taxable income which is taxed by NJ and from that tax liability, the NJ taxes withheld (W2 box 17) are subtracted and the remainder is the tax owed. 

Since, as you mention, NJ and PA have a reciprocity agreement taxes should only be withheld for your resident state (NJ) and you don't need to file in PA; there will be no credit for taxes paid to another state.