Could a New Jersey resident claim an other-jurisdiction credit for New York Metropolitan Commuter Transportation Mobility Tax?

Plain-English summary

New Jersey allowed an other-jurisdiction credit for the self-employment portion of New York's MCTMT, but not for MCTMT imposed on wage earners as a payroll tax.

For a self-employed New Jersey resident, the Division treated MCTMT as a tax based on income. Self-employment income taxed by both New Jersey and MCTMT could therefore enter the New Jersey credit calculation.

For wage earners, MCTMT was a payroll tax and did not qualify for the credit.

The TAM's example showed that a taxpayer might need separate Schedule A calculations when New York State tax, New York City Unincorporated Business Tax, and MCTMT applied to different amounts of the same business income. The separate results were added to determine the total credit.

What this means for you

Self-employed New Jersey residents

Identify the income taxed by both states and separate overlapping tax bases when computing the credit.

Wage earners

The MCTMT payroll-tax treatment described in the TAM did not qualify for the New Jersey credit.

Tax preparers

More than one Schedule A computation may be needed when the New York taxes do not cover identical income.

Common questions

Q: Did self-employment MCTMT qualify?
A: Yes, for income also taxed by New Jersey under the TAM's analysis.

Q: Did wage-earner MCTMT qualify?
A: No.

Q: Could multiple Schedule A calculations be necessary?
A: Yes, when the relevant New York taxes applied to different amounts of income.

Citations and references

• New Jersey Schedule A — Credit for Income or Wage Taxes Paid to Other Jurisdictions
• New York Metropolitan Commuter Transportation Mobility Tax
• New York City Unincorporated Business Tax

Source

• Landing page: https://www.nj.gov/treasury/taxation/tam-pubs.shtml
• Original PDF: https://www.nj.gov/treasury/taxation/pdf/pubs/tams/tam4.pdf

Original ruling text

Credit For Taxes Paid To Other Jurisdictions The New York Metropolitan Commuter
Transportation Mobility Tax
TAM 2010-4 – Issued November 1, 2010
Tax: Gross Income Tax
The New York Metropolitan Commuter Transportation Mobility Tax (“MCTMT”) is a tax imposed
on certain employees and self-employed individuals engaging in business within the
metropolitan commuter transportation district.
For New Jersey Gross Income Tax purposes, the New York MCTMT is an income tax and is
available for credit for taxes paid to other jurisdictions, as the self-employment part is
considered a tax based on income. (For wage earners, however, it is a payroll tax and is not
available for credit).
Therefore, the self-employment income taxed under the New York MCTMT that is also taxed by
New Jersey can be included in the New Jersey credit calculation. If the MCTMT amount exceeds
the New York State tax and New York City Unincorporated Business Tax (UBT), taxpayers may do
three calculations if they need additional credit.
Example:
Joe and Sally Smith are full-year New Jersey residents. The couple is married and filed a joint
return on which they reported total income for the year of $175,000. The income consisted of
Sally’s wages, earned in New Jersey $25,000, interest $15,000, dividends $10,000, capital gains
$25,000, and Joe’s net profits from the business he owns in New York City, $100,000.
New York State imposed $6,000 in tax based on taxable income of $75,000. In addition, New
York City imposed $4,000 in UBT on the full $100,000. The New York Metropolitan
Transportation Mobility Tax (MCTMT) imposed $340 on the full $100,000.
The Smiths must complete two Schedule As; one for the $75,000 taxed by both New York State,
the New York City UBT and the MCTMT and another for the $25,000 “excess income” taxed only
under the New York City UBT and the MCTMT. The results of the two separate credit calculations
are then added to determine the total credits for taxes paid to other jurisdictions. There is no
separate Schedule A for the MCTMT in this example since there is no excess of the New York
UBT.

Note: A Technical Advisory Memorandum (“TAM”) is an informational statement of the law,
regulations, or Division policies. It is accurate on the date issued. Subsequent changes in the law
or regulations, judicial decisions or changes in Division policies could affect the validity of the
information presented in a TAM.

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