Updated October 24, 2026. Quick answer: Line 44 of the 2025 NJ-1040 is the credit for income taxes paid to other jurisdictions. It applies to income from outside New Jersey that another jurisdiction also taxed, it is worked out on Schedule NJ-COJ, and the booklet caps it at the tax on line 43. The result reduces the balance of tax on line 45.
What this line asks
The booklet’s opening statement for the line is “You may be able to claim a credit if you had income from outside New Jersey.” The schedule behind it describes its purpose this way: “The credit reduces your New Jersey tax based on the percentage of income that was taxed by other jurisdictions.” It adds “It is not necessarily a dollar-for-dollar credit.”
Who it applies to
Schedule NJ-COJ opens with its test: “Complete this schedule only if you had income from outside New Jersey that was taxed by another jurisdiction and subject to New Jersey Income Tax in the same tax year.”
The booklet names who is excluded: “You cannot take a credit for taxes paid to the U.S. Government, Puerto Rico, or any other country or territory.”
It also explains the Pennsylvania agreement: “Therefore, you cannot claim a credit for taxes paid to Pennsylvania on that type of income.” The reason it gives is that compensation “paid to New Jersey residents employed in Pennsylvania is not subject to Pennsylvania income tax.” For other income it says “other types of income (e.g., self-employment, gain from sale of property) are not covered by the agreement and may be eligible for the credit.”
The schedule’s line 1 has its own list of what counts. One of the conditions is “The income must be taxed by both New Jersey and a jurisdiction outside New Jersey, and” and another is “The income must have been properly taxed by the other jurisdiction, and”
What the instructions say to enter
| Step | What the booklet says |
|---|---|
| Line 44 | “Complete Schedule NJ-COJ to calculate the credit and enter the amount on line 44.” |
| More than one schedule | “If you complete more than one Schedule NJ-COJ, add the credits from each schedule and enter the total.” |
| Jurisdiction code | “Enter the jurisdiction code from the following chart in the boxes provided on line 44.” |
| More than one jurisdiction | “If you are claiming a credit for more than one jurisdiction, use the code for” the booklet’s Multiple Jurisdictions entry. |
| Schedule line 1 | “Only include income that meets all of the following criteria when completing line 1:” |
| Schedule line 2 | “Enter the amount of income reported on line 29, Form NJ-1040.” |
| Schedule line 3 | “Divide line 1 by line 2 and enter the percentage on line 3.” |
| Documentation | “Keep complete copies of any returns filed with other jurisdictions.” |
The booklet’s chart of jurisdiction codes is a multi-column chart printed on the schedule’s page. It is not read here; use the chart in your own booklet. A separate list says what not to put on schedule line 1, including “Income that is not subject to New Jersey Income Tax (e.g., unemployment compensation);” and “401(k) contributions.”
The booklet also gives a retiree-relevant caution about investment income: it lists “Interest, dividends, gains on sales of securities, and other income from intangible personal property (savings accounts, stocks, bonds) unless (1) the income was derived from a business, trade, or profession carried on in the other jurisdiction, or (2) you are required to file a resident return with both New Jersey and the other jurisdiction and report the income on both returns” among the things not to include. See out-of-state pensions and New Jersey for the state’s own treatment of out-of-state pensions.
The figures the line prints
The credit has one ceiling written as a sentence: “The credit on line 44 cannot be more than your tax on line 43.”
On the schedule, the percentage on line 3 is explained in one sentence: “Since line 1 cannot be more than line 2, the result will be 100% or less.” Line 2 is the line 29 amount; see NJ-1040 line 29. The schedule’s other worksheets use columns and are not read on this page.
Where the result goes next
The credit comes off the tax: “Subtract line 44 from line 43 and enter the result. If line 44 is blank, enter the amount from line 43.” That is line 45, Balance of Tax.
The credit also affects the property tax choice. The booklet says those claiming it should “first complete lines 1 and 2 of Worksheet H. Then complete Schedule NJ-COJ and Worksheet I.” See NJ-1040 line 41 for that deduction.
Part-year residents
For the schedule’s line 1 the booklet says “Enter on line 1 only the income derived from the other jurisdiction during the period of time you were a New Jersey resident.”
Edition and line numbers
This page reads the 2025 NJ-1040 New Jersey Resident Return booklet, the current file the New Jersey Division of Taxation served on 2026-10-24. Check the edition printed on your own form and use that edition’s line numbers.
Common mistakes
- Claiming a credit for tax paid to the federal government or a foreign country. The booklet says “You cannot take a credit for taxes paid to the U.S. Government, Puerto Rico, or any other country or territory.”
- Claiming a Pennsylvania credit on wages. The booklet says “Therefore, you cannot claim a credit for taxes paid to Pennsylvania on that type of income.”
- Letting the credit exceed the tax. The booklet says “The credit on line 44 cannot be more than your tax on line 43.”
Related: out-of-state pensions and New Jersey, New Jersey retirement taxes, and leaving New Jersey.
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- 2025 NJ-1040 New Jersey Resident Return booklet (instructions and forms), New Jersey Division of Taxation: www.nj.gov
- 2025 Form NJ-1040 New Jersey Resident Income Tax Return, New Jersey Division of Taxation: www.nj.gov
Read from the state revenue documents linked above on October 24, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer or the state revenue department is the right place to confirm anything consequential.