Live in NJ Work in NYC Taxes

The PropertyClub Team
Jul 4th 2020
If you are going to live in NJ and work in NYC, you're probably wondering how you'll be paying taxes. This guide will go over all you need to know from where you'll file, to the most significant benefit of living in New Jersey, avoiding the city income tax.

New York City is arguably one of the most famous and incredible cities in the world. With its fantastic culture and competitive work environment, it’s no wonder so many people dream of a life in NYC. But while it’s amazing, it’s also notorious as being one of the most expensive cities to live in. The buzzing metropolis attracts millions of people who flock to NYC to both live and work. However, there are those who have a job in New York City but don’t fancy forking out the thousands of dollars (if not more) each month that it costs to live in the city. 

New Jersey is just a stone’s throw away from NYC, and with its cheaper housing, more suburban feel, and easy commute into the big apple, it’s no wonder why so many people choose to make New Jersey their home base. For those living in the Northern parts of New Jersey, the daily commute to Manhattan can be as short as thirty minutes. That’s even less travel time than living in some parts of the city itself! Because of the convenience and cheaper living costs, the appeal of living across state lines is high for numerous people. If this appeals to you, you’ll want to check out some of the best commuter towns in NJ

But even though the pros of living in NJ might outweigh the cons, as the new tax deadline imposed after the outbreak of the coronavirus pandemic fast approaches, many commuters might be wondering where they file their taxes. Nobody wants to be double taxed, or file incorrectly and risk getting in trouble with the IRS. And if you have to file income tax in two separate states, it might be of concern to some that they’ll end up paying more taxes. So, if you live in one state but work in another, where does your tax money go?

Where do I file taxes if I live in NJ and work in NY? 

In short, you’ll have to file your taxes in both states if you live in NJ and work in NY. Like most US States, both New York and New Jersey require that you pay State income taxes. Some states have reciprocal tax agreements, allowing you only to pay taxes in your home state. New Jersey has a reciprocal tax agreement with Pennsylvania, but they do not have one with New York. Because of this, since you live in a different state from the one that you work in, you need to make sure you file a tax return in both. 

Do you pay double taxes if you live in NJ and work in NY?

In New York, you will need to file a non-resident return (IT-203). While in New Jersey, you will need to file as a resident (NJ-1040). But if you’re filing two returns, that begs the question: do you pay double taxes if you live in NJ and work in NY?  

Great news for you, no! You do not have to pay double taxes. However, if you want to avoid paying more than you owe, it is vital that you file your New York return first so that when you file in New Jersey, you will receive a tax credit for any taxes you already paid. This will prevent you from being taxed on the same income by both States. 

Do you pay NYC tax if you live in NJ?

One of the major benefits of living in NJ is that you won’t have to pay NYC income tax as only New York City residents are required to pay it. 

What to watch out for

Below are some important things you’ll want to watch out for if you plan on living in NJ while working in NY. 

Commuter Tax

New York City and its surrounding areas are home to massive amounts of commuters. Because of this, the city enacted the Metropolitan Commuter Transportation Mobility Tax to cover the costs and upkeep of public transport. The good news is that if an employer pays you and you receive a regular W2, you are not responsible for paying commuter tax. Instead, your employer is. There is an exception if you are self-employed and net more than $50,000 a year. In this case, you are required to pay the commuter tax of 0.34%. 

Charitable Donations

Charitable donations can be a bit complicated, but if you are a New Jersey resident who works in New York, you may be at an advantage when it comes to itemizing charitable deductions. New Jersey doesn’t allow taxpayers to write off charitable donations from their state income tax. On the other hand, if you are filing as a non-resident in New York, you may be able to receive a benefit for charitable donations. You can use New York Form IT-196 to calculate itemized deductions, and this can include contributions to charity. 

Unemployment

With COVID-19 causing huge surges in unemployment, there are undoubtedly thousands of people wondering what they will need to do if they live in New Jersey but are receiving unemployment checks from New York. Although for most people, this will mainly be relevant for your 2020 tax return, it’s important to note that if you are receiving unemployment from New York, you should report it on that tax return. New Jersey does not tax unemployment benefits. However, New York does tax for non-residents. 

What are the Benefits of Living in New Jersey?

There are numerous advantages to living outside of expensive NYC and commuting in to work. You benefit from cheaper housing, affordable parking for your car, and quieter neighborhoods, making it an ideal solution for lots of people. Just make sure that you are diligent when filing your tax returns to keep yourself in good standing with the IRS. If you are struggling to file, it could be a good idea to seek help from a tax professional. A tax professional will help ensure you have all the right forms filled out and avoid any tax complications.