New Jersey allows a Credit for Taxes Paid to Another State to help prevent double taxation when the same income is taxed by both New Jersey and another state or political subdivision.
If you were a New Jersey resident and paid income tax to another jurisdiction on income that is also taxed by New Jersey, you may qualify for this credit.
Program Entry
New Jersey Return → Credits → Credit for Taxes Paid to Another State
What Is the Credit for Taxes Paid to Another State?
The Credit for Taxes Paid to Another State is available to New Jersey residents who:
- Earned income in another state or political subdivision;
- Paid income tax to that jurisdiction; and
- Must also report the same income on their New Jersey return.
The credit helps reduce the impact of being taxed twice on the same income.
When Can This Credit Be Claimed?
You may qualify if:
- You were a New Jersey resident during the tax year.
- Income earned in another state is also taxable to New Jersey.
- You paid tax to the other jurisdiction on that income.
Common examples include:
- Wages earned while working in another state.
- Partnership income from another state.
- S corporation income taxable by another state.
- Business income earned outside New Jersey.
- Rental income taxable by another state.
Information Needed to Claim the Credit
Select Begin to enter information about the other jurisdiction.
You may need information from:
- The other state's income tax return.
- Forms W-2.
- Schedule K-1.
- Other supporting tax documents.
Information commonly requested includes:
- Name of the state or jurisdiction.
- Type of income taxed.
- Amount of income taxed by both states.
- Tax paid to the other jurisdiction.
States With Reciprocal Agreements
Some neighboring states have reciprocal agreements that affect how wages are taxed.
If another state's return was filed only to obtain a refund of withholding and no tax was actually due to that state, a New Jersey credit generally is not available because no tax was paid to the other jurisdiction.
What Income Qualifies?
The income used to calculate the credit must generally be:
- Taxable by New Jersey; and
- Taxable by the other jurisdiction.
Examples include:
- Salary and wage income
- Self-employment income
- Business income
- Partnership income
- S corporation income
- Certain rental income
How Is the Credit Calculated?
The credit is generally limited to the lesser of:
- The tax actually paid to the other jurisdiction on the income; or
- The amount of New Jersey tax attributable to that same income.
Note: If you file a resident NJ return and a nonresident return of a different state and have income taxed by both, the program will automatically calculate this credit if applicable. If you are filing two part-year or nonresident state returns, you must manually complete the credit if you had income taxed by both states.
Multiple States
If you paid tax to more than one state or jurisdiction, enter the information separately for each state.
Each state is calculated individually to determine the allowable New Jersey credit.
How Does This Affect My Return?
The Credit for Taxes Paid to Another State may:
- Reduce New Jersey tax liability.
- Prevent double taxation of the same income.
- Increase a New Jersey refund.
- Reduce the amount of tax owed.