Live in New Jersey, Work in Arkansas: Which State Taxes Your Paycheck?
Answer
Two returns, one credit. Arkansas has the first claim on wages earned inside the state and withholds accordingly. New Jersey then taxes you as a resident on everything and gives credit for what Arkansas already took, capped at what New Jersey would have charged on that same income.
Last verified
Two states can lawfully tax the same wages: Arkansas because the work happened there, New Jersey because you live there. Nothing prevents the overlap in advance — it is unwound afterwards, on the New Jersey return, through the credit for taxes paid to another state.
A New Jersey resident taxed by another state on the same income claims the credit for taxes paid to other states on Schedule NJ-COJ. The credit is capped at the New Jersey tax on that income, so it removes the double tax but never refunds the excess when the other state charges more.
What you file
- 1Nonresident return · ArkansasForm AR1000NR
File the Arkansas nonresident return FIRST — you need the Arkansas tax figure before you can complete New Jersey.
- 2Resident return · New JerseySchedule NJ-COJ
File a New Jersey resident return reporting all income, then claim the credit for tax paid to Arkansas. The credit is capped at what New Jersey would have charged on that same income, so if Arkansas taxes it at a higher rate the difference is not refunded.
The two states, side by side
| New Jersey | Arkansas | |
|---|---|---|
| Taxes wages | Yes — graduated | Yes — graduated |
| Reciprocity partners | 1 (Form NJ-165) | None |
| Convenience rule | Only against convenience-rule states | No |
| Nonresident return | Form NJ-1040NR | Form AR1000NR |
| Credit for other-state tax | Schedule NJ-COJ | Form AR1000TC |
| Nonresident safe harbour | None published | None published |
| Local income tax | No | No |
| Revenue department | New Jersey Division of Taxation | Arkansas Department of Finance and Administration |
| Last verified |
The other direction
Reversing the commute does not always reverse the answer. Living in Arkansas and working in New Jersey gives:Both states — credit offsets the double tax.
Same two states, different situation
The withholding answer turns on how you are paid and where the work happens, not only on which two states are involved.
- Remote worker: New Jersey → ArkansasHome state only
- 1099 contractor: New Jersey → ArkansasHome state, plus the client state if you work there
- Moved mid-year: New Jersey → ArkansasTwo part-year returns
Other New Jersey pairs
Questions people actually ask
I live in New Jersey and work in Arkansas. Which state takes the tax out of my paycheck?
Two returns, one credit. Arkansas has the first claim on wages earned inside the state and withholds accordingly. New Jersey then taxes you as a resident on everything and gives credit for what Arkansas already took, capped at what New Jersey would have charged on that same income.
Which state should my employer be withholding for?
Arkansas. The wages are sourced to Arkansas, so Arkansas withholding is correct and there is no New Jersey withholding to set up.
Will I end up paying tax twice on the same income?
Not twice over, but you will pay the higher of the two rates. New Jersey gives residents a credit for tax paid to Arkansas on the same income, claimed on Schedule NJ-COJ. The credit is capped at the New Jersey tax on that income, so if Arkansas taxes it more heavily the excess is not refunded by either state.
How current is this?
The New Jersey and Arkansas rules on this page were last checked against New Jersey Division of Taxation and Arkansas Department of Finance and Administration on 2026-08-07. We re-check the full grid every December after state legislative sessions close, and re-check the convenience-of-the-employer states quarterly because that is where the rules move fastest.
Sources
Every fact above comes from the revenue department that publishes the rule. We do not cite secondary summaries, and we do not restate a figure we could not find at source.
- New Jersey Division of Taxation — individual income taxaccessed 2026-08-07
- New Jersey Division of Taxation — Convenience of the Employer Ruleaccessed 2026-08-07
- Arkansas Department of Finance and Administration — individual income taxaccessed 2026-08-07