My understanding is that NJ allows a deduction of up to 15000 for property taxes paid. Am I doing something wrong, or is this a bug?
You are not doing anything wrong, and it's not a bug. The property tax deduction reduces your taxable income, which indirectly reduces your tax by a small percentage of the deduction. The property tax credit directly reduces your tax by the amount of the credit. TurboTax does a calculation, as specified by the state, to determine whether the deduction or the credit gives you a greater reduction of your tax. There are a number of situations that can make the calculation somewhat complicated. You get either the deduction or the credit, whichever makes your tax lower.
This is correct!
However it's due to one of those special considerations. The property tax credit is $50, assuming an effective tax rate of 3% (very conservative) you'd need your property taxes to be less than $1667 for the $50 credit to be a better value. Most homeowners in NJ will have much higher property taxes. (As do I)
The reason my calculations work out the way they do is due to the fact that I work in New York City , therefore have only NY state taxes withheld from my paychecks and use the other state income tax credit for NJ. Reducing my AGI for NJ reduces the amount of this credit I can claim thereby making the property credit a better option!
You are overlooking the fact that the other-state credit also reduces the property tax deduction that you can claim. You can't compare the full property tax deduction to the reduced property tax credit. I don't know how you did your calculations. You have to use Schedule NJ-COJ and Worksheet I on page 34 of the Form NJ-1040 instructions, or take a look at Schedule NJ-COJ and Worksheet I in TurboTax.