NJ Residence/Employed in NY - Summary Taxes Paid to Other States Part

[ThunderousWatcher]

Hello TT Pros!

New to using TurboTax and getting a little confused on the NJ part. Hoping someone is able to help. I work in New York, paid New York taxes, and live in New Jersey and didn't pay New Jersey tax. I finished the IT-203 for New York and now doing the NJ one. I'm on the part for "Summary of Taxes Paid to Other States" and it lists New York and the credit. Where did this credit come from or how was it calculated?

When I click on edit, it goes to "Tell us about the money you earned in New York". It lists the New York amount for Double-tax income (which is the correct amount shown on my W-2 Box 1) and the Tax paid to New York which has an amount I'm not sure where it pulled from. Is this calculated by TT or it should've been pulled from a Box from my W-2?

Also, on the further NJ parts for Estimate Income, I'm not certain how to answer because my income varies throughout the year so it'll be difficult to estimate, i.e. I may have the same income as 2025 or more. Because of this, I'm not sure how to go about "Choose Your Payment Option" to calculate my NJ 2026 estimated taxes: 100% of my actual 2025 tax, 100% of my 2026 estimated tax, 80% of my 2026 estimated tax or no estimates. 

Please let me know if I can provide any additional information and any guidance is much appreciate

[maglib]

 @ThunderousWatcher  my first question is does your employer know you live in NJ ?  You should have taxes withheld from your paycheck for NJ, and if the employer will not, then you must pay estimated taxes to NJ.  There is a safe harbor you can choose that New Jersey taxpayers with taxable gross income exceeding $150,000 ($75,000 for married/civil union partner, filing separate) meet the safe harbor exception for the underpayment of estimated tax if the total amount of all payments of estimated tax made on or before the last date prescribed equals 110% of last year’s tax pursuant to N.J.S.A. 54A:9-6(d)(3). Safe harbor rules allow taxpayers to avoid underpayment penalties by paying either 100% of their previous year's tax liability or 80% of their current year's tax liability , whichever is smaller, through withholding and timely quarterly estimated payments. Payments are required if you expect to owe.  So safe bet is to set estimated taxes based on current year income and make sure to pay at least what you owed this year if your employer will not withhold.

Note you can always redo the estimated taxes if you find that you are working less hours in NY.  Just make sure to say when you redo the estimates, the amounts you already paid in.

The next issue is if your employer did NOT withhold NJ, did they report your W-2 with NJ as the state of income, often there is a Federal, NY and NJ W-2.  If not during the NJ interview you will have to adjust your income.  NY and Federal income are normally the same, NJ is normally higher.  NJ state wages (Box 16) are normally higher than federal wages (Box 1) because New Jersey does not allow deductions for pre-tax health insurance, commuter benefits, or non-401(k) retirement contributions (like 403(b) or 457 plans). NJ taxes many items that are exempt for federal purposes, making Box 16 generally higher. The interview will ask you about these so make sure to add them in if your employer did not report NJ wages.

You were correct to do the non-resident tax return first.  Then you complete NJ.  During the NJ interview if you had a W-2 for both NY and NJ, there will show a list of double taxed income and you will have to remove the NY wages so you are not taxed on both. If there is only 1 wage listed, you should not have to, again you will have to add the health insurance and retirement amounts back in if there is not a w-2 for NJ.

I hope this helps.

[ThunderousWatcher]

Hello @maglib

Yes - very helpful and I should've included some more important details. 

I'm married and filing jointly with income over $150,000. My spouse has no income so it's only me. My W-2 shows the NJ State Wage and Tax statement along with NY, and did not withhold NJ. 

On the Estimated Income part, I should put in a 2026 Estimate for total income and revise if I see my income change throughout 2026? 

Also, if I choose 100% of my actual 2025 tax (I'm predicting my income will be higher than last year), I would pay the amounts on the due dates? I don't think I had done this last year and only paid what I owed NJ when I filed. This is where I'm confused.

Thanks so much for your response and taking to time to answer.

[ThunderousWatcher]

I should've looked at my 2025 NJ1040 to answer my questions.

I did 100% of 2024 taxes. On the NJ-2210 Worksheet, I had paid NJ all 4 period payments on April 2025. 

I will do the same for 2026 (100% of my actual 2025 tax) unless there's something I'm missing.

Thanks again

[maglib]

@ThunderousWatcher 

Yes, perfect if you paid estimated taxes quarterly, and pay at least what you owed the year before to NJ, then you should not be penalized.  I would be talking to my employer and asking them to w/h NJ taxes as most NY employer will do it.   If your tax liability is $400 or more to NJ you must pay at least what your tax liability was the prior year or 80% of the current year tax liability to have a safe harbor from interest and penalties for the underpayment.  It sounds like you paid in what you owed for 2024 timely so you should be ok.

You said your employer did report NY wages on a W-2 but, did zero withholding.  So yes during NJ interview you will have to remove NY wages so as not to double report income.  Make sure your employer reported correct NJ wages adjusted as I prior discussed that your NJ wages should be higher than Federal on the W-2.

Make sure you enter  the estimated tax amounts you actually paid and the actual dates you paid them during the Federal interview.  

One last note is NJ has a a lower threshold for deducting medical expenses and as NJ already taxes premiums paid, you may be eligible to deduct medical on your NJ return as the threshold is 2% vs. Federal it is 7.5%  cap over AGI threshold. All Rx, glasses, dental, mileage, premiums paid, even things like toothpaste and aspirin, other care items, and vitamins are part of your medical expenses if your dr. tells you to take them as they may exceed the NJ 2% threshold (hint I put them in during Federal interview where I know I won't exceed their cap so they flow directly to NJ as it tracks them better, and putting the pretax premiums there won't impact Fed if you don't meet threshold so it is ok).

[ThunderousWatcher]

Hi @maglib ,

Noted on the NJ medical expense deductions! Really appreciate the item examples.

"Make sure you enter  the estimated tax amounts you actually paid and the actual dates you paid them during the NJ interview." Meaning what I paid in 2025?

My employer uses ADP so I will check NJ withholding there. I remembering trying to fill out the withholding form but didn't know how to fill it out. I'll post a question when I get there.

Thanks so much for all this information!

[maglib]

I'm sorry during the Federal interview I meant to say, you enter state taxes paid, amount from py refund applied to currenty year, and all estimates made.  

[ThunderousWatcher]

Hi @maglib ,

Make sense! 

In the Federal Taxes interview, I go to "Other Tax Situations?" Then I should enter NJ State Taxes paid for 2025 and the 2026 estimated, and the current NY refund amount in "Additional taxes and repayments" or "Form W-4 and estimated taxes?" Just want to make I'm in the right part.

It's unbelievable how helpful you have been and your patience with my questions. Thanks for the guidance! 

[ThunderousWatcher]

I clicked around some more and also found Federal Taxes > Deductions & Credits > Estimated Taxes > State estimated taxes for 2025 and 2024 state estimated taxes paid in 2025. I see that it has the quarterly dates for the amounts to be entered.

But then in Other income taxes, there are sections "2024 Refund Applied to 2025" and "Other Income Taxes Paid in 2025".

Not sure which part to use

[maglib]

Yes under Deductions & Credits tab>Estimates & OtherTaxes Paid> visit all and it will walk you through.
Estimates paid will be in Estimates section and it will ask about Federal and state and even local.
Other Income Taxes section is if you had a 2024 refund you applied to 2025 estimated taxes. You would have to look at your 2024 return to see if you had a refund and then applied it to estimated taxes, if you owed in 2024, then 0.
There is also a section for state taxes paid in 2025 for a prior year.

I think you got this.