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How can I calculate the other state tax credit as a New Jersey resident who works in New York?

SOLVEDby TurboTax99Updated June 02, 2023

If you’re a New Jersey resident and work in New York State, you’ll need to file a New Jersey resident return and a New York State nonresident return.

New Jersey requires you to pay tax on all of your income, regardless of where it is earned. In addition, New York collects taxes on the income you earned while working in the state. This income won’t be double-taxed because New Jersey gives you a tax credit for taxes paid to other jurisdictions.

This credit reduces your New Jersey Income Tax liability so that you don't pay taxes twice on the same income. However, this isn’t a dollar-for-dollar refund of the taxes you paid to New York. Per the State of New Jersey, your credit can't be more than the amount you would’ve paid if you earned the income in New Jersey (rather than New York).

To ensure accurate calculations of the credit on your New Jersey return, always complete the nonresident New York return first.

Follow these instructions to compute the other state tax credit for New Jersey:

  1. Open or continue your return
  2. Select State from the left menu, then select Start next to your nonresident New York return
  3. Answer the interview questions and allocate your wages and/or self-employment income earned in New York State
    1. On the New York Income Allocation screen, answer Yes if all of your wages were earned in New York or answer No if only some of your wages were earned in New York
    2. If you answered No, the next screen, Your Form W-2 Summary, will show your W-2(s). Select Edit and adjust your NY income by allocating by days or percentage
  4. Allocate any deductions that are attributable to New York. If none, enter zero
  5. Continue through the interview questions until you reach the Let’s Review Your New York Numbers screen
    1. Take note of the Amount Taxed by New York State, as well as the Allocated NYS Tax amount
  6. Select State from the left menu, and start your New Jersey resident return
  7. Continue until you reach the Summary of Taxes Paid to Other States screen. The credit amount for your New York taxes should be listed here. To view or edit this amount, select Edit
  8. On the Tell us about the money you earned in New York screen, you should see your double-taxed income and any amount of tax paid to New York
    1. Note: The tax amount won't be the tax withheld from your W-2. It'll be the tax you were liable for on your New York return
    2. If there are any differences from what you noted in Step 5a, enter those amounts under the column Amount if Different
  9. On the following screen, we’ll let you know your credit amount for tax paid to New York

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