22 Sep We’re moving out of N.J. What do we have to change with our taxes?

Q. My wife and I are both retired and receive monthly pensions. I also receive Social Security. We have federal and state taxes taken from our checks, and we also pay a quarterly estimated taxes of $1,100. We moved to Delaware permanently on Sept. 1. How much longer do we need to pay New Jersey taxes and switch to Delaware taxes?
— Adios New Jersey

A. There are several items to consider if you’re changing residence.

Your combination of tax withholding and your estimated tax payments are a mechanism to hopefully cover your taxes owed both to the federal and state governments, said Michael Maye, a certified financial planner and certified public accountant with MJM Financial in Gillette.

If you did become a resident of Delaware on Sept. 1, the impact of your move is primarily on the state side, Maye said.

For the 2020 tax year, you will be considered a part-year resident of New Jersey.

Per the state’s Division of Taxation website:

“As a part-year resident, you report only the income you earned or received while you were a New Jersey resident. You must prorate all the credits, exclusions, exemptions, and deductions for which you qualify. That means you can take only that part of the full deduction, credit, exclusion, or exemption that represents the amount of time you were a resident of the state. If you continued to receive income from New Jersey sources after you moved out of the state, or if you received income from New Jersey sources prior to moving to the state, then you also will have to file a New Jersey nonresident tax return, Form NJ-1040. In this case, you will file both a part-year resident return and a part-year nonresident return.”

Maye said you should determine your respective 2020 tax liabilities to New Jersey and Delaware.

“It seems the best course of action would be to hire a tax pro to actually run the numbers to determine the projected tax liability owed to both New Jersey and Delaware, and based on that modify the withholdings or quarterly estimated tax payments as needed,” Maye said.

Armed with that information, you can contact your pension administrator and request the state tax withholding be changed. Alternatively, you can make or stop quarterly estimated tax payments to New Jersey or Delaware as needed, he said.

There are a few things to remember for your New Jersey income taxes. 

First, Social Security income is not taxed by the state, Maye said.

Next, for qualifying married couples in New Jersey with income up to $100,000, there is a retirement income exclusion, he said.

“Starting in 2021, if you have no New Jersey source income, then you won’t have to file a State of New Jersey tax return and would just file a State of Delaware tax return,” Maye said. “In terms of 2020, for the Delaware tax return, you will have the option of either filing a resident return or a part-year resident tax return, whichever is most beneficial.”

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This story was originally published on Sept. 22, 2020.

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.