17 Jun If I work overseas, do I have to pay N.J. state tax?
Q. I was born and raised in New Jersey but eventually moved to Maryland for work. I have now been overseas working for the government since 2014. I no longer own property in Maryland and would like to establish residency with my parents in New Jersey. I will continue with my foreign service career, not spending more than 30 days in New Jersey each year. How do I claim residency to get a license and vote, and would I qualify to file non-resident taxes each year on my income, effectively lowering my tax rate?
A. You’ve raised some very good questions about establishing residency in New Jersey.
You said that you will not spend more than 30 days annually in New Jersey, meaning you don’t intend to be taxed at the state level. Let’s review the rules.
First, as a U.S. citizen, you are taxed on your worldwide income at the federal level, said Cynthia Fusillo, a certified public accountant with Peapack Private Wealth Management in New Providence.
So regardless of time spent in the U.S. or any property you may own here, you must file a federal income tax return to report not only income from U.S. sources, but any income from worldwide sources, she said.
You may or may not have a state tax filing requirement as well. This is, in part, where the 30 days you mentioned come into play.
New Jersey defines a resident as either a person who is domiciled in the state or maintains a place of abode in New Jersey and is present in the state more than 183 days, Fusillo said.
Domicile is a matter of intent, she said.
It is sometimes also referred to as your permanent legal residence, she said. It is the place you intend or plan for your home to be and where you always intend to return, she said.
“Generally, it is where you are registered to vote and hold a valid driver’s license and where your car is registered; where you do your banking, have doctors and regularly worship; it can also be where you keep the things that are most valuable and precious,” she said.
This is commonly an issue for taxpayers who have homes in more than one state and when the problem becomes which state is the intended home state.
“The burden of proof is then on the taxpayer to prove which state is actually his/her state of domicile. If someone is domiciled in New Jersey but does not maintain a place of abode here and does not spend more than 30 days here, he/she will not be considered a resident under this definition, as long as you also maintain a place of abode elsewhere. It is assumed from your introductory paragraph that you do maintain a place of abode overseas,” Fusillo said.
You mentioned living with your parents. You certainly don’t have to own the home yourself for it to be considered your place of abode, and chances are your parents’ home will qualify as your place of abode, she said. Factors are determined on a case by case basis.
Residency, outside of the domicile definition, is attributable to a taxpayer who maintains a place of abode in New Jersey and spends more than 183 days here, Fusillo said.
“This one is pretty cut and dry. But you don’t plan to spend more than 183 days in New Jersey, so you would not be a resident under this definition,” Fusillo said. “Assuming you can keep out of the above definitions, then your filing requirements would remain at the federal level only. I would also suggest using your foreign address on your federal income tax return.”
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This story was originally published on June 17, 2021.
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