If you live in New Jersey and work in New York, you must file tax returns in both states because NJ and NY do not have a reciprocal tax agreement. You file a NY non-resident return reporting NY-source income and paying NY tax, then file a NJ resident return reporting all income and claiming a credit for taxes paid to NY. Greg Monaco, CPA handles NJ/NY commuter returns regularly and ensures the credit is claimed correctly to avoid double taxation.
Hundreds of thousands of people live in NJ and work in NY. NJ and NY do not have a reciprocal tax agreement.
The Basic Rule
You file a NY non-resident return reporting NY-source income and paying NY tax. You file a NJ resident return reporting all income. NJ gives you a credit for taxes paid to NY.
Remote Work Complications
NY’s convenience of the employer rule means if you work remotely from NJ for a NY employer as a convenience, NY may still tax that income.
NYC Income Tax
If you work in NYC but live in NJ, you do not pay NYC income tax. It only applies to NYC residents.
Common Mistakes
Forgetting the NY non-resident return, claiming the NJ credit incorrectly, not accounting for the convenience rule, and mixing up estimated payment allocations.
Key Takeaway
The NJ/NY commuter tax situation requires filing in both states, but the NJ credit for taxes paid to NY prevents true double taxation in most cases. The biggest pitfalls are NY's convenience of the employer rule (which can tax remote work days), failing to file the NY non-resident return, and miscalculating the NJ credit. Work with a CPA who handles multi-state returns regularly.
Related reading: How Capital Gains Are Taxed in NJ | Quarterly Estimated Taxes in NJ | Tax preparation services
