Sourcing income between multiple states

[user17700683691]

I live in NY and work in NJ. I work about 50% in-person in NJ and 50% remote from my home in NJ. I know NJ has a convenience of the employer rule where I pay taxes on all of my W2 income regardless of where I work because if I choose to work in NY it's for my convenience. But I also pay taxes on that income in NY as a NY resident. It sounds like NJ has a credit for people who live in NJ but work in NY. Does NY have something similar going the other way? Or am I bound to be double taxed?

[DianeW777]

No, you will not be double taxed. New York (NY) also has a credit for taxes paid to another state on the same income. NY does not have a reciprocal agreement with any state. Since you are a NY resident, any money taxed to New Jersey (NJ), NY will provide a credit for tax paid to another state or in your case NJ.

State Returns - Your resident state requires you to include all worldwide income. Assume both states require income tax returns to be filed: 

1. Report the income on each state return that is from the nonresident state
2. Report it on your resident state and receive credit for taxes paid to another state.

Credit for taxes paid to another state is allowed by a resident state when the same income is being taxed to another state.  Your resident state does not want you to pay tax twice on the same income. The credit that is allowed will be the lesser of:

1. the tax liability actually charged by the nonresident state, OR
2. the tax liability that would have been charged by your resident state

In most cases complete your nonresident state first and TurboTax will automatically carry the credit to your resident return.

[user17700683691]

Thanks for your help! How can I know if the credit has been properly applied?

[DianeW777]

When you go through the New York (NY) return watch for the 'credit for tax paid to another state'. Make sure the credit has been applied.  

If you should happen to prepare your resident return first (NY) you should write down the income taxed by New Jersey(NJ) and the actual tax applied on the NJ return in case you need to enter the information in NY.  Make sure to get the tax liability and not the refund or balance due. 

If you do the NJ return first and you have entered your resident address in your tax return, then it should be automatically applied with TurboTax and you should see it as you step through the NY return.