NY Nonresident state wage allocation in Turbo Tax

[Cortcoll]

My husband works in NY and lives in NJ (I work and live in NJ). We are filing jointly. When we complete his NY state return, despite allocating only his income to NY, it is taxing us based on overall adjusted gross income. Any ideas on how to correct? Thank you! 

[ErnieS0]

New York is not taxing your overall adjusted gross income. NY uses your total income to set the base tax rate.

You then pay tax on the NY percentage of what the total tax would have been if all you income was NY income.

For example, if you earned $100,000 total and $30,000 in NY, your tax rate would be based on $100,000. Say the NY tax on $100,000 is $10,000. Then your tax would be 30% ($30,000/$100,000) of $10,000 or $3,000.

[Cortcoll]

Thank you for the quick and helpful answer! Stupid follow up question - how is it that they are allowed to tax me at this rate when a significant portion of my income was made outside of NY? In your example, let's say I made $70,000 outside of NY, how are they able to tax me at the NY rate for $100,000 when so much of it was not made there? I guess that's just the rule? Sorry, don't understand the logic. 

[MaryK4 · Accepted solution]

The law says they can only tax you on New York state source income, and the method has to be applied in the same manner to everyone.  Since they use the same calculation to determine state tax due then apply the income percentage, it is valid.  (This is the method to squeeze the maximum taxes- I guess since you do get the credit for income paid to another state on your resident tax return, it evens out in the end.) @Cortcoll

[Cortcoll]

Ah, that makes sense - thank you!!