What happens to N.J. taxes if we buy a home somewhere else?

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Q. My wife and I currently own a home in New Jersey. If we buy a second home in South Carolina with the intent to make that our legal domicile, can we simply change the designation of our New Jersey home from principal residence to secondary residence as far as the mortgage company, homeowners insurance company and Motor Vehicle Commission are concerned and, if so, how do we do that? Also, is there a different formula for calculating the real estate taxes on a secondary residence than on a primary residence in New Jersey?
— Making plans

A. It looks like you’re preparing to take a big step.

There are several things you would need to do.

To no longer be considered a resident of New Jersey for tax purposes, you must either sever your domicile in New Jersey and spend no more than 183 days in the state, said Neil Becourtney, a certified public accountant and tax partner with CohnReznick in Holmdel.

He said there is a second, less common test in which you don’t sever your domicile but maintain a home in another state and you spend no more than 30 days in New Jersey. In that case, you can still be considered a nonresident, he said.

Changing your domicile is not as simple as notifying your mortgage company, your insurance company, and the Motor Vehicle Commission of your change.

Becourtney said a domicile is the place you consider your permanent home. Many different factors are looked at, including: where you vote; where your vehicles are registered; location of your doctors, country clubs, and religious institutions; and your proximity to any children you have and any business activities — your place of employment or a business location where you are an owner or officer.

If you desire to change your domicile to South Carolina, all your mail should be addressed to the South Carolina address, even from New Jersey utilities, he said.

He said domicile is somewhat subjective and one size does not fit all.

“Assuming you successfully change your domicile, then as long as you are not in New Jersey more than 183 days — the “statutory resident” test — you will be treated as a nonresident of New Jersey,” he said. “As a nonresident, you would only be subject to tax on any New Jersey source income. Any nonresident New Jersey tax incurred would give rise to a credit against your South Carolina resident tax.”

Becourtney said your New Jersey real estate taxes are unaffected by whether your home is a primary residence or secondary residence.

“Real estate taxes in New Jersey are eligible for reduction for certain taxpayers including veterans, senior citizens, and those who are blind or disabled, often with income restrictions attached,” he said.

Many of those programs, though, are only for those domiciled in New Jersey. For example, you won’t be eligible for the Senior Freeze for a vacation home or second home or a property that you rent to someone else.

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This story was originally published on Jan. 18, 2022.

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.