Avoiding New Jersey income tax

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Q. I retired in June 2015 and sold my primary house in New Jersey. I am renting in Florida and wonder if I should continue renting and make Florida my primary residence so they won’t tax my pension, and then buy a condo in New Jersey to spend 4 to 5 months there as a secondary place to live?
— Moving

A. Where you establish your domicile can make a big difference in your tax burden — as long as you do it right.

If you are able to claim Florida as your primary residence, you will save by not paying New Jersey income taxes, said Ronald Garutti, a certified financial planner with Newroards Financial Group in Clinton.

However, be careful.

“I’ve often read articles about sports stars who try to do this but they over stay their welcome in New Jersey (or the other state they are trying not to pay) and the state comes after them,” Garutti said. “The burden is on you, the taxpayer, to prove that you have moved from New Jersey to Florida.”

Garutti said there have been cases where states will ask to see credit card or other purchase receipts, they could ask to see your travel itinerary and receipts, and other documentation to support your “where I live” story.

The state of Florida has 10 criteria listed on the state website to show you’re a resident, including a formal declaration of residency, the date terminating residency in the previous state, proof of voter registration, a Florida drivers license, and more.

If you make the move, be sure to change your other paperwork to reflect your intentions.

Your actual property ownership will help show your residency, too.

“It might be best to buy in Florida and rent in New Jersey to further have records to support your claim,” Garutti said. “Renting in New Jersey could provide you a place to stay, but make sure you physically spend more than half the year in Florida and you’re ready to prove it.”

If you need another push to change your domicile, take a look at the potential for estate tax savings when you leave New Jersey, and make sure you understand the so-called Exit Tax.

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This story was first posted in January 2016.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.