The short version
New York City's resident income tax applies to people who live in the city. Living in New Jersey and commuting in does not make you a city resident, so the city resident tax does not normally apply to your wages.
New York State is different. It taxes income earned inside New York, even when the worker lives elsewhere. That is why your pay may carry New York State withholding while your home is in New Jersey.
Two returns, one tax credit
The common result is a New York nonresident return for the New York wages and a New Jersey resident return for everything. New Jersey gives a credit for tax you paid to New York on the same income, so you are generally not taxed twice on the same dollars.
The credit has limits. If New York tax on that income is higher than what New Jersey would charge, you pay the higher rate overall, not both amounts in full.
Where the work is done matters
New York looks at where you performed the work. Days at an office in the city point to New York income. Days spent working from home in New Jersey may point the other way, but New York can treat some remote days as New York days when the job is based there for the employer's convenience.
New Jersey may not give a credit for tax on income it considers earned in New Jersey, so a remote worker should count days carefully and ask a professional about their situation.
A worked picture of the credit
Take two neighbors with the same pay, one who lives in Hoboken and one who lives in Brooklyn, both working in Manhattan. Both owe New York State nonresident or resident tax on that pay, but only the Brooklyn neighbor is a city resident, so only that person pays the city resident tax and files the city pieces of the return.
The Hoboken neighbor files a New Jersey return for everything and a New York nonresident return for the Manhattan wages, then takes the New Jersey credit for the tax paid to New York.
Other taxes that can apply
A self-employed person doing business in the city can face a city or regional tax separate from income tax, and some businesses face city unincorporated business tax. These rules are separate from the wage rules above, so a freelancer needs to check them on their own.
Commuter costs such as tolls and transit do not change the tax calculation for most employees, though some employers offer pre-tax commuter benefits.
Checking your paycheck
Look at your pay stub and W-2. If a city tax line appears and you do not live in the city, ask payroll whether it is correct. If the employer withholds the wrong place, the amount may be recoverable through a return, but ask first.
A withholding mistake is not the same as a tax obligation. Your return decides what you owe, and withholding is only an advance payment toward it.
Software and professional help
Software that handles both New Jersey and New York can walk through the nonresident return and the credit. MCC Tax 1040 covers both for its supported years. For complicated cases such as stock pay, a business you own or many remote days, consult a CPA or enrolled agent.
Common questions
Do I pay NYC tax if I work in Manhattan and live in Hoboken?
Generally no city resident tax, because you do not live in the city. You may still owe New York State nonresident tax on the pay earned there.
Will New Jersey tax me on my New York pay?
A New Jersey resident is taxed on all income, then receives a credit for tax paid to New York. The credit may not cover everything.
What if I work from home three days a week?
Where each day is worked can matter. Keep a calendar and check the current rules or ask a tax professional.
This guide is general information, not tax, legal or accounting advice. Rules, fees and due dates change; check with the IRS, the NJ Division of Taxation or a licensed professional for your situation.