If I live in New Jersey, do I pay less in taxes if I work in New Jersey or work in New York City (I have an option to work in either office)?

Having done multiple returns for NYC residents and NJ residents who live in NJ and work in NYC, the NJ residents pay MUCH less in taxes.

The reason is simple: the tax credits NJ allows for NY state taxes usually completely offsets all of the NJ income tax, and those NJ residents who work in NYC are EXEMPT from NY City income taxes.

The NYC residents get hit TWICE, for both NY state AND NY City income taxes.

If you can deal with the daily commute, live in New Jersey and work in New York.

If you live in NJ and work in NJ, you pay NJ taxes on your total income. This is generally less expensive than living in NJ and commuting to work in NY. If you commute to NY you pay NY tax as a non-residient on your salary, plus NJ taxes on any other income. Figure that with the higher tax rates of NY versus NJ plus cost of commuting you probably won't do as well as working in NJ. Of course this assumes that you would make the same salary working either location.