11 Nov I’m leaving N.J. When am I a non-resident for tax purposes?

Q. I live full-time in New Jersey and I also own a Virginia townhouse in a retirement community. I rent out the townhouse by the year. I plan to sell the New Jersey home and move to Virginia all in the same month, but it will take me a few months to transfer my residency to Virginia, including the driver’s license, voter’s registration and the rest. When will I be considered a Virginia resident in terms of the taxes on the sale?
— Moving on up

A. We’re sorry to see you go.

To answer your question, we’re going to assume your New Jersey home was your principal residence for at least 24 months out of the five-year period ending on the day you sold your home.

Assuming that’s true, $250,000 of capital gains is forgiven — or $500,000 if you’re married — for both federal and New Jersey income tax purposes, said Bernie Kiely, a certified financial planner and certified public accountant with Kiely Capital Management in Morristown.

Kiely said there is no sales tax on the sale of a New Jersey home, but there is a Realty Transfer Fee which is paid by the seller. That fee must be paid in order to change the names on the deed.

Now, the so-called exit tax, which is not an extra tax but an estimated income tax payment on the home’s sale.

This tax payment will not apply to you for two reasons. Kiely said.

“The first is you will be required to file a New Jersey Part-Year income tax return for the year you changed your residency,” he said. “The other is the home was your principal residence subject to the tax forgiveness as described above.”

Kiely said residency was once described to him by a lawyer as a matter of intent. As long as you reside within the borders of the United States, you are a resident of a state.

“So, your intent is to leave New Jersey and to take up residence in Virginia. The exact date your residence changed is rather arbitrary,” he said. “It does not depend on when you change your address on all legal documents. I would recommend you make the day you leave New Jersey for the last time as the date you take up Virginia residency.”

Good luck with the big move!

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This story was originally published on Nov. 11, 2019.

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