Do You Need to File Taxes in Both New York and New Jersey?

Why New Jersey residents working in New York file two returns

New York taxes income earned within the state, regardless of where the person doing the work lives. So if you live in Jersey City, Hoboken, or elsewhere in New Jersey but your job is based in Manhattan, New York generally considers that income taxable there, even on days you might work remotely, depending on New York's specific rules for telecommuters. Meanwhile, New Jersey, as your state of residence, taxes all of your income no matter where you earned it.

How the resident credit helps avoid double taxation

To avoid paying full tax on the same income to both states, New Jersey allows a credit for taxes paid to other states, including New York. In practice, this means you calculate your New York nonresident tax first, then apply a credit against your New Jersey liability. The credit doesn't always offset the full difference, since the two states calculate tax differently, but it's designed to prevent you from being taxed twice on the same dollar.

What commonly gets missed

A few things trip people up in this situation. Employers sometimes withhold for the wrong state, or withhold for only one when both apply. Remote work arrangements can also complicate things, since New York has historically applied a "convenience of the employer" rule that can tax income even for days worked from home in New Jersey, depending on the specifics of your arrangement. Because these rules shift and depend on your particular employer and work pattern, it's worth having someone confirm your specific situation rather than assuming last year's approach still applies.

What this means at filing time

In practice, a New Jersey resident working in New York usually needs three things prepared together: a New York nonresident return, a New Jersey resident return, and a clear calculation of the credit connecting the two. Preparing them separately, or with two different preparers who aren't coordinating, is one of the more common ways people end up overpaying or making an error on the credit calculation.

This article is for general informational purposes and isn't personalized tax advice. Tax rules and thresholds change from year to year, confirm current figures with your preparer or directly at IRS.gov and nj.gov/treasury/taxation before filing.