25 May Is New Jersey or Florida better tax-wise?
Q. Help! My wife and I are considering making Florida our main domicile and we would keep our home in New Jersey. We are very confused about the benefits of doing so. Our bottom line? I have a pension of $80,000, we have $45,000 in Social Security, $25,000 of taxable dividends and interest, $6,000 in Required Minimum Distributions and $15,000 in tax-free bonds. What would we save if we change our domicile?
– Getting out, maybe
A. It’s a tough calculation, and you want to do it right.
Here’s what you should consider, but you should also speak to your tax preparer to make sure you haven’t left out any information here.
If you successfully change your primary residence from New Jersey to Florida, you would cease having to file a New Jersey gross income tax return (Form NJ-1040), said Neil Becourtney, a certified public accountant and tax partner with CohnReznick in Eatontown.
“You will accomplish this if as you indicate you make Florida your domicile and while keeping your New Jersey residence you do not spend more than 183 days in the Garden State in any year.” he said. “None of the income listed would be taxable to a New Jersey nonresident so your tax savings would be the entire New Jersey tax that you would otherwise incur as a resident taxpayer.”
Currently as a New Jersey resident, the pension, taxable dividends/interest and Required Minimum Distributions (RMD) income are taxable to New Jersey, he said, noting that all states are forbidden from taxing retirement income received by a nonresident taxpayer.
Social Security benefits are expressly exempt from New Jersey tax, and the income from the municipal bonds is taxable if derived from non-N.J. bonds, he said.
But overall, it seems your taxable income is still too high for you to qualify for the New Jersey pension exclusion, which has a $100,000 income ceiling.
“Something that you should be aware of as far as your contemplated change of residency is that if and when you decide to sell your New Jersey residence, you may not meet the `two out of five preceding years’ test for excluding up to $500,000 of gain as a joint filer,” Becourtney said. “Incurring New Jersey nonresident tax on a sizable gain realized on the sale of your New Jersey residence might far exceed the yearly tax savings from becoming a Florida resident.”
It’s time to do some math.
Email your questions to moc.p1610831985leHye1610831985noMJN1610831985@ksA1610831985.