New Jersey Alters Nonresident Income Tax Calculation

Article excerpt

New Jersey has changed its method of computing tax on nonresidents. Beginning in 1993, New Jersey will tax nonresidents by calculating their tax on income from both New Jersey and non-New Jersey sources and multiplying the resulting tax by the ratio of New Jersey income to gross income for the year calculated as if the taxpayer was a New Jersey resident.

The New Jersey tax will now be computed in the same manner as New York State. As a result, nonresident taxpayers with non-New Jersey source income may pay higher taxes because of the effect of higher graduated income tax rates applied to their New Jersey source income.

This law change represents the latest salvo in the continuing border war between New York and New Jersey. New York's similar law change became effective January 1, 1988. Prior to 1984, a New York State resident with New Jersey source income was required to e both a New Jersey Nonresident Income Tax return and a New Jersey Emergency Transportation Tax return and pay the higher of the two taxes. The New Jersey Emergency Transportation Tax was a mirror image of the New York State income tax return then in effect and often led to a significantly higher tax. …

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