INDIVIDUAL NEW JERSEY INCOME TAXES
CREDIT FOR TAXES PAID TO OTHER JURISDICTIONS
As a New Jersey resident, you may be eligible for a tax credit against your
New Jersey income tax if you have income from sources outside New Jersey. You
qualify for the credit if you paid income or wage tax on the same income in the
same year to both New Jersey and to another taxing jurisdiction outside New
Jersey.
For purposes of this credit, a taxing “jurisdiction” means any state in the US other than New Jersey, or a political subdivision of another state, such as a city. You cannot claim a credit for income tax paid to the Federal Government, Canada, Puerto Rico, or any other foreign country or territory.
New Jersey requires you to pay tax on all of your income, regardless of where it’s earned. The credit reduces your New Jersey income tax liability so that you don’t pay taxes twice on the same income; it is not a refund of the taxes you paid to another state or city. Your credit may never exceed the amount you would have paid if you had earned the income in New Jersey.
You claim the credit by completing a New Jersey Schedule A and enclose it with your New Jersey income tax return.
As a result of the Reciprocal Personal Income Tax Agreement between Pennsylvania and New Jersey, compensation paid to New Jersey residents employed in Pennsylvania is not subject to Pennsylvania income tax. There, New Jersey residents may not claim a credit on Schedule A for taxes paid to Pennsylvania on such earnings.
However, New Jersey residents may claim a credit for wage taxes imposed and collected by the City of Philadelphia or any other municipality in Pennsylvania.