How do I claim the New Jersey credit for taxes paid to another state?

If you earned income in another state and pay tax on the same income in both New Jersey and the other state for the same time period, you may claim a credit for the tax paid to the other state on your Resident New Jersey return. The credit cannot be more than the amount you would have paid if the income was earned in New Jersey and the credit is automatically calculated in your account when you add a nonresident return to your already created resident New Jersey return if you pay taxes to both New Jersey and another state.

Part Year Residents

If the other state return is a Part-Year Resident return, you will be required to enter the information asked of you within the New Jersey state return.

If you need to manually adjust your entry, follow these steps within the program:

1. State Section
2. New Jersey Return
3. Credits
4. Credit for Taxes Paid to Another State

What else do I need to know?

• Exception: New Jersey and Pennsylvania have a reciprocal agreement which indicates income earned by New Jersey residents that work in Pennsylvania is not taxable to Pennsylvania. Therefore, the credit for taxes paid to PA cannot be taken on the Resident New Jersey return. If Pennsylvania taxes were withheld from income that qualifies for the reciprocal agreement, an adjustment must be made to the return to correctly calculate the amount of tax due to each state. Adjustments must be made to the resident/nonresident returns of reciprocal states to accurately calculate the tax. Please visit our Knowledgebase Article for complete filing instructions.

• The City of Philadelphia does not have a reciprocal agreement with New Jersey. New Jersey residents that paid wage taxes to the city of Philadelphia can claim a credit on the NJ return.

To claim the Philadelphia credit, follow these steps within the program:

1. State Section
2. New Jersey Return
3. Credits
4. Credit for Taxes Paid to Another State
5. Credit for Taxes Paid to Philadelphia or Other Jurisdiction

Income or wages taxes paid to another jurisdiction on S Corporation income that is also taxed in New Jersey may also be eligible for the credit. 

Additional Information

• What Credit is Available for Taxes Paid to Another State?
• New Jersey Instructions