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NJ-COJ - Tax Credit Paid to other Jurisdiction

Forum|Forum|5 years ago
June 17, 2020
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I am not sure if I have been filing the NJ-COJ form correctly for the past several years. My wife and I are both NJ Residents. I work in NY and she works in NJ. I make 100K, she makes 50K. Ignoring all deductibles and so on, my understanding is that NY will tax based on 150K and so will NJ. When I fill out my NJ-COJ form, is Line 1 suppose to be 100K and Line 2 to 150k? If so, it would seem like I am only getting about 66% back from the tax amount that I paid to NY.

Any help is greatly appreciated. Thanks!

Best answer by rjs

@Deetee wrote:

When I fill out my NJ-COJ form, is Line 1 suppose to be 100K and Line 2 to 150k? If so, it would seem like I am only getting about 66% back from the tax amount that I paid to NY.

Yes, that's correct. The Credit for Income Taxes Paid to Other Jurisdictions on your New Jersey tax return is about 66% of your New York tax. As it says in the paragraph that I quoted above from New Jersey Publication GIT-3W, "The credit represents the amount of New Jersey Income Tax that you would have paid had the income been earned in New Jersey, or the amount of tax actually paid to the other jurisdiction, whichever is less." New York tax rates are higher than New Jersey rates, so the credit is only the amount of New Jersey tax on your New York income. The effect is that you pay the full New York tax. The credit eliminates any New Jersey tax on your New York income, but it does not reduce or cancel out your New York tax. You still pay the full New York tax.

@Deetee wrote:

Just wanted to see if I am doing something wrong or it is normal to get such a low percentage in ny tax credit for my situation.

Yes, it's normal, because of the difference in tax rates between New York and New Jersey. You are not doing anything wrong.

rjs

Employee

Are you using TurboTax? This forum is run by Intuit, the company that makes TurboTax, to help its customers use TurboTax to prepare their tax returns. TurboTax will automatically fill out Schedule NJ-COJ correctly for you. Prepare your New York nonresident tax return first, then your New Jersey resident tax return.

The following explanation of the Credit for Income Taxes Paid to Other Jurisdictions is from New Jersey Division of Taxation Publication GIT-3W.

"This credit minimizes double taxation of income that is already taxed by other jurisdictions. Though the credit reduces your New Jersey Income Tax, you are not necessarily entitled to a dollar-for-dollar credit for the total amount of taxes paid to the other jurisdiction. The credit represents the amount of New Jersey Income Tax that you would have paid had the income been earned in New Jersey, or the amount of tax actually paid to the other jurisdiction, whichever is less."

fanfare

Employee

your joint NY taxable income is $100,000. Your wife doesn't have any NY income.

rjsAnswer

Employee

@Deetee wrote:

When I fill out my NJ-COJ form, is Line 1 suppose to be 100K and Line 2 to 150k? If so, it would seem like I am only getting about 66% back from the tax amount that I paid to NY.

Yes, that's correct. The Credit for Income Taxes Paid to Other Jurisdictions on your New Jersey tax return is about 66% of your New York tax. As it says in the paragraph that I quoted above from New Jersey Publication GIT-3W, "The credit represents the amount of New Jersey Income Tax that you would have paid had the income been earned in New Jersey, or the amount of tax actually paid to the other jurisdiction, whichever is less." New York tax rates are higher than New Jersey rates, so the credit is only the amount of New Jersey tax on your New York income. The effect is that you pay the full New York tax. The credit eliminates any New Jersey tax on your New York income, but it does not reduce or cancel out your New York tax. You still pay the full New York tax.