Question

Moved midyear NYC to NJ, changed job from NYC to NJ 2 mo later. Which return do I claim credit for taxes paid to other state?

Forum|Forum|5 years ago
March 3, 2021
1 reply
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I lived and worked in NYC until August 1, 2020. At that time I moved to NJ but kept working at my NYC-based job for another 2 months or so (Aug-Sep), then changed to an NJ home-based job for the rest of the year. Assuming earnings of 10k/mo for simplicity, my W-2s are as follows:

Job A (NYC-based), earned 90k total:

NY W2: 90k federal income, 90k NY income (this includes income earned in NJ on next line)

NJ W2: 90k federal income, 20k NJ income (corresponding to Aug-Sep)

Job B (NJ-based), earned 30k total:

NJ W2: 30k federal income, 30k NJ income

The 20k earned from NYC-based Job A while living in NJ is where I want to make sure I'm not double taxed. On both NY and NJ state returns, TurboTax prompts me with questions about allocating income between states, but then also gives me the opportunity to claim taxes paid to the other state.

I'm assuming I should allocate 90k to NY, 50k to NJ, then on one of my returns, take a credit for taxes paid on the 20k to the other state. But on which state's return? And how do I calculate the tax amount to take credit for?

Thanks!

More optional details that make this puzzling to me:

- On the TurboTax's "taxes paid to other state" section for the NY return, it seems to only ask me for the total tax payable to NJ--not only the double-taxed part--with this confusing language: "Tax Computed on Your New Jersey Return: TurboTax does not currently compute an amount of tax for New Jersey. If this is incorrect, enter the tax below." If I fill that in, it seems to give me a credit for the entire amount I put in, even though that includes NJ taxes on the 30k earned from Job B. That seems wrong, but I'm not sure how else to interpret TT here.

- Meanwhile, on the NJ return's "taxes paid to other state" section, it asks me to enter the double-taxed income and taxes paid on that income to NY. I know the income part (30k), but how would I figure out the tax part? TT has no instructions here for allocating my total NYS tax between NY income and NJ income.

C

charlie_brownAuthor

Think I figured this out. I should claim the credit on my NJ return only, since I was an NJ resident during the double-taxed period, and the NY form for credit for taxes paid to another state says: "This credit is allowable only for the part of the tax that applies to income received in the other taxing authority while you were a New York State resident."

Regarding calculating the amount, it seems on the NJ return, the credit you can claim is capped at (NJ tax * % of NJ resident income taxed by NY), which in this case is (NJ tax * 20k/50k) = (NJ tax * 40%), so I just put that amount in.

If any of the above is wrong I'd still welcome input.