Do I Pay Income Taxes on Unemployment Benefits If I Worked in New York & Live in New Jersey?
If you live in New Jersey but work in New York, you're required to pay taxes not just to the state in which you live, but also to the state in which you were previously employed. Given that unemployment benefits are considered by state unemployment agencies, including New Jersey's, to be a form of income, you have to pay taxes on them, regardless of where you were employed.
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Unemployment Benefits
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Unemployment benefits are considered a form of income, even though they're not provided for an individual in exchange for performing a task. This means that if you receive income, you're charged state taxes on them, which you may choose to have withheld. You receive no exemption from this requirement for working in New York and living in New Jersey.
New York Employment
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If you work in New York and are fired from a job in New York, you should apply to the New York State Department of Labor. Even if you're a resident of New Jersey, it's New York that's "liable" for your unemployment. You continue to pay taxes to New York for this income, presumably as you were doing while you were working a job in New York.
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New Jersey Residency
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Because you're a New Jersey resident, you pay a resident income tax, even for income received from other states. The tax that you pay depends on your income bracket. The more money you make, the higher your tax rate. If you were working in New York while living in New Jersey, you should already have been paying these taxes.
Considerations
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Any taxes you've already paid to New York on your unemployment benefits may be claimed as credit against your New Jersey resident income taxes. Also, when you pay taxes in New York, you're required to fill out New York State Department of Taxation and Finance Form IT-203, which establishes to whom you're paying taxes and how much. In addition to state taxes, you need to pay federal taxes, too.
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