I live and work in NYC and my wife lives in CA, can we file (MFJ) joint tax return? Or do we have to file married filing separately?

For federal purposes you can file jontly, no problem. As for each state - NY gives you the option of MFJ or Maried Filing Separately since you are a resident and your wife is a non-resident. For CA your wife must file as MFS assuming that you are a non-resident for the entire year and you had no CA income sources.