NJ Resident Working in NY: Taxes, Credits, and Savings Explained
If you live in NJ but work in NY, you might be wondering where you pay taxes and how much they’ll be. The short answer is that you will pay taxes in both states, but you’ll get a tax credit. And in the end, a major perk of living in NJ while working in New York is that you won’t have to pay NYC income taxes.
Table of Contents
How Do Taxes Work if You live in NJ But Work in NY?
Do You Have to Pay NYC Tax if You Work in NYC and Live in NJ
Do You Have to Pay a Commuter Tax if You Live in NJ and Work in NY?
Living in NJ and Working in NY Tax Tips
Living in NJ and Working In NY Taxes Bottom Line
How Do Taxes Work if You live in NJ But Work in NY?
If you work in NY but live in NJ, you’ll have to file taxes in both states. As a NJ resident who works in New York, you’ll need to file a NJ State Income Tax with Form NJ-1040 as well as a NY Non-Resident Income Tax return with Form IT-203. Income tax rates in NJ vs. NY are pretty close, so the main tax savings will only be for people who work in NYC, but live in NJ.
When you work in NY but live in NJ, your employer will also notify both states of your income. Even though you commute to work, your employer must withhold New York state taxes. Your employer will also report your income and taxes to New Jersey. While this might sound concerning, there’s no need to worry as you won’t be double-taxed, as you’ll receive tax credits to provide tax relief on your NJ tax return for any taxes withheld for New York.
To ensure everything is filed correctly, it’s best to engage an experienced accountant to help you file both your NJ and NY tax returns.
Do You Have to Pay NYC Tax if You Work in NYC and Live in NJ?
No, you won’t have to pay NYC income taxes if you work in the city and live in NJ. This is one of the biggest perks of living in NJ, and many high-income earners choose to live in places like Hoboken or Jersey City to save on taxes. If you think saving on NYC taxes might be worth it for you, check out our list of the best NJ towns near NYC.
There is one notable exception to this rule, though, and that’s for city workers. If you’re employed by the city of New York, you might still have to pay NYC income tax, even if you live in New Jersey.
Do You Have to Pay a Commuter Tax if You Live in NJ and Work in NY?
No, in most cases, NJ residents that work in NY will not have to pay a commuter tax. Specifically, W-2 employees do not have to pay a commuter tax.
However, there are a few instances when NJ commuters will be subject to a commuter tax. Some self-employed individuals that make more than $50,000 will have to pay the Metropolitan Commuter Transportation Mobility Tax, or MCTMT. The MCTMT commuter tax is a 0.34% tax on your New York net profit from self-employment income.
Living in NJ and Working in NY Tax Tips
Hire an Accountant
The best tax tip for anyone who is living in New Jersey and working in New York is to hire an accountant. You want to make sure you get the correct tax credits on your NJ tax return, and a professional will be able to ensure everything is okay and that no mistakes are made.
Don't Get Fancy With Deductions
One mistake some people make when filing their tax returns is taking too many deductions. For NJ residents who work for a New York company, the home office deduction is a common one, especially now that remote work is becoming more popular. However, this deduction is not for W-2 employees and can only be taken by self-employed and 1099 taxpayers.
Beware of Rules Regarding Remote Work
If you’re working for a NY company but doing some work remotely at your home in NJ, you’ll need to be aware of various additional tax rules. For example, you might be able to move some of your income to your NJ return to pay a lower tax rate. However, this is quite tricky, and you should consult with an accountant to ensure you can optimize your taxes.
Living in NJ and Working In NY Taxes: Bottom Line
The simple truth is that living in New Jersey while working in New York will complicate your taxes as you’ll have to file two returns, but you won’t be double-taxed. And if you happen to work in NYC, you’ll actually enjoy significant tax savings as you won’t have to pay NYC taxes. The best tip we have to help you make sure you file everything correctly is to work with an experienced accountant while filing your tax returns.
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