03 Jul Tax returns when couple lives in different states

Q. Last month my longtime girlfriend and I finally tied the knot. She lives and works in Pennsylvania and is a homeowner there. I live and work in New Jersey where I own a home. I spend approximately three days per week at her home and she seldom visits New Jersey. We plan to live full time at her place when I retire in a couple of years. What should we do with our tax returns?
— Smitten and confused

A. Congratulations on your marriage.

You’ve got some options to consider, and the only way to know the best strategy for you is to run the numbers.

For federal tax purposes, you can either file as married filing jointly or married filing separately, whichever produces the lower tax cost, said Michael Karu, a certified public accountant with Levine, Jacobs & Co. in Livingston.

Your state situation is a little more complex, but not terrible.

“While states mandate that those filing joint returns file using the same status for state purposes, there are exceptions when one is a non-resident,” he said.

For New Jersey, Tax Topic Bulletin GIT-4, Filing Status, offers definitions for each type of filing status.

It says: “Married couples filing a joint federal return must file a joint New Jersey return in most cases. Spouses who are married, filing separate for federal purposes, must be a married/CU partner, filing separate for New Jersey.”

But, Karu said, the next page says: “However, if during the entire tax year one spouse was a resident of New Jersey and the other a nonresident, the resident can file a separate New Jersey return, if required. The nonresident spouse also may have to file a nonresident return if income was received from a New Jersey source. Each filer calculates income and exemptions as if federal married, filing separate returns had been filed. The spouses have the option of filing a joint return, in which case their joint income would be taxed as if both were residents.”

Karu said based on that, you can file a joint return for federal purposes and separate returns for state purposes.

“For a tax preparer, it would require the preparation of three returns – the joint federal and then separate returns for the states – as the joint information wouldn’t be completely reportable on the separate returns,” he said.

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This story was originally published on July 3, 2019.

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