I am no longer a resident of NJ, so do I file a non-resident tax form for NY?

Also, does it matter when exactly I moved for tax calculation purposes-like is the income supposed to be allocated to both states separately?

P.S. Just to clarify I still work in NY, so from what I have read-->All my income is NY source income (reported on NY State Tax return)

You need to file TWO tax returns.

You file the NY state return first, paying the taxes to NY ONLY on income earned within the NY state borders.

Then you file the New Jersey return, and claim a credit for the taxes already paid to New York. Assuming that all of your income was earned in NY state, the result will be a complete offset of any income taxes owed to New Jersey.

If you need professional help filing, email me at the email address in my profile.

What about interest income from bank?

I assume your first sentence has a typo in it - instead of asking "I am no longer a resident of NJ, so do I file a non-resident tax form for NY?," you meant to write "I am no longer a resident of NY, so do I file a non-resident tax form for NY?" - correct?

Interest income is taxed by the state you live in at the time the interest is received. Assuming interest is credited to your account monthly, this means allocating a portion to each state tax return depending on the date you moved.

Because you moved mid-year, you will have to file partial-year resident forms with both states. As ATE suggested, complete the NYS form first, reporting all income you received while a NYS resident (wages, interest, dividends, other income) plus your NY-based income for the time you were no longer a NYS resident (i.e. your wages from your NY job while a NJ resident). If memory serves for NY I think you have to file both a partial year resident return and a non-resident return, in order to cover both periods of time. Then on the NJ part-year resident form you report any pay taxes on all income earned while a NJ resident (including wages and interest and other income earned during that period), you will calculate a preliminary tax on that amount, and then take a credit for taxes paid to other jurisdictions (i.e. New York) while a NJ resident. As ATE says this credit should just about eliminate any tax owed to NJ. One other point - both states will actually require you to report all income you receive for the full year, but they only tax you on the portion earned while a resident or from in-state sources; they require this information to determine your proper tax bracket.