Tax Questions if You Live in NJ and Work in NY

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If you live in New Jersey and work in New York, you will have to file income taxes in both states. Generally, New Jersey will give you a credit for the tax that you paid to New York, but you may still owe additional tax to New Jersey as well. Certain states have agreements to prevent you from having to pay tax on the same money to both states, but New York and New Jersey are not among them.

Understanding Your Tax Situation

Like the majority of U.S. states, New Jersey and New York both have state income taxes. If you live in New Jersey and work in New York, you generally need to file a tax return in both of those states, and you may owe taxes to both states. You will usually want to file a New Jersey resident income tax return and a nonresident return in New York.

You will usually only owe tax on income such as bank interest and investment income in your home state of New Jersey, but you can potentially owe taxes on your wages and salary to both states. Keep in mind that if you work in New York, you may only have had New York taxes withheld from your paychecks, but that doesn't mean you don't necessarily owe additional tax to New Jersey.

Follow the instructions from the New York and New Jersey tax agencies to file your returns and pay any taxes you owe by the appropriate deadline. If you aren't sure how to compute your income tax when you live in multiple states, you may want to consult a tax adviser such as a certified public accountant or use tax software. Remember that you also need to file a federal tax return if you live in New Jersey and work in New York. This will be largely separate from your state tax returns.

New Jersey Tax Credit

There is no specific credit for "work in NY, live in NJ taxes," but New Jersey generally offers a tax credit for taxes paid to taxing authorities outside the state. That doesn't apply to taxes paid to the federal government, foreign countries or territories such as Puerto Rico, but it does apply to taxes paid to New York.

Fill out New Jersey tax form Schedule NJ-COJ and submit it with your New Jersey tax return to be eligible for the credit. Note that you can't claim more in tax credit than you owe in New Jersey tax on the money you earned in New York.

Reciprocal Tax Agreements

Some states have reciprocal tax agreements where if you work in one state that's in the agreement and live in another, you will only pay tax to your home state. New Jersey has such an agreement with Pennsylvania, but it does not have one with New York. This won't apply if you commute from New Jersey to New York, but if your commute takes you across other state lines, you might want to see if such an agreement might simplify your taxes.

New York City Income Tax

If you live in New York City or certain other cities in New York, you may be required to pay a city income tax in addition to your state income tax. If you don't live in those cities but do work in them, you are not required to pay the tax.

For people who live in New Jersey but work in New York City, you may need to claim a refund if New York City income tax was withheld from your paycheck. Claim this refund as part of your New York state return.

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