Living in NJ while working in NYC

Since as an NJ rsident you do not live in NYC, you do not pay NYC resident tax. That's the good news. But you do still have to pay NY State non-resident income tax on your NY source of income, as well as NJ tax on your total income. Your employer should withhod NY State income tax from your paycheck. When you calculate your taxes next April you will determine NY State' tax bill based on your NY source of income only (your wages). Then when you calculate your NJ tax they first make you calculate it as if you earned all yor income in NJ, then they let you take a credit for taxes you've already paid to other states. If you don't have any other significant sources of income (such as capital gains, dividends, spouse's income, etc) you will probably end up owing NJ nothing. But you still have to file the NJ tax form. Now to answer your question - you save a lot by not living in NYC, but if your wages are your sole source of income there is little to no difference in your total tax bill between living in NJ versus living in NY State outside of NYC or Yonkers. However, if you have non-NY sources of income you're better off living in NJ as their tax rates are lower.