Taxed on Non-NY Source Income as a Nonresident?

[pengs]

Hello,

I am a NJ resident. For a few months in 2020, I worked a part-time remote job with a NY company and received W2 income from them. I also had capital gains income in NJ from personal trading throughout 2020.

In my nonresident NY tax return, I allocated 0 of my capital gains to NY Sources, yet TurboTax is still counting all of my capital gains as taxable income in NY. I believe only NY Source Income is taxable in NY. Is this an error, or am I missing something?

Thanks!

[AmyC]

You are correct.  Go back through the state return and be sure to mark zero for NY capital gain.

NY should only tax the wages from NY. Your capital gains happened as a NJ resident so NJ taxes them. When you go through the NY nonresident state return, it asks about all of your income.

[pengs]

Thanks Amy for your reply! I marked 0 for NY capital gain during allocation, but all of my capital gains are still showing up in NY taxable income. It turns out in the Form IT-203 that NY taxable income (line 36) uses the federal column amount rather than NY State column amount in line 31. Is this intended?

[AmyC]

Yes. If you keep going to line 45, you will see a percentage calculated for NY. That percent of NY income is multiplied by the NY tax to create your liability.

For example:

• NY tax on your federal income is $8,000
• But only 10% of your income was earned in NY
• NY tax liability will be 10% of $8,000 or $800.

[pengs]

Ah, that helped clear it up. Thanks!