24 Feb If we move to Florida, will N.J. tax us on rental income?

Q. We are contemplating Florida residency but right now maintain our permanent residence in New Jersey. We also have investment properties in New Jersey that generate rental income. If we continued to own those properties but sold our primary residence and declared Florida as our domicile, would we still be subject to New Jersey income tax on our rental income?
— Trying to decide

A. You’ve got a big decision to make.

Here’s what you can expect, first, starting with residency.

Your residency is determined by where you were domiciled during the tax year, said Martin D. Hauptman, an attorney and partner in the trust and estates, and taxation practice groups with Mandelbaum Salsburg in Roseland.

He said if you moved into or out of New Jersey for part of the year, you are a part-year resident and may need to file a resident tax return to report the income received for the period you resided here.

If you are not domiciled in New Jersey, but received source income in New Jersey, you may need to file a nonresident tax return, he said.

Source income means the money you earned in New Jersey, while domicile is the place and state you consider your permanent home — the place where you intend to return after a period of absence such as a vacation, business assignment or educational leave, he said.

“You have only one domicile, although you may have more than one place to live,” he said. “Your domicile continues until you establish a new permanent home elsewhere.”

The Division of Taxation considers many factors when determining if New Jersey is your domicile, including your intent, where you register to vote, your driver’s license and vehicle registration, where you have family ties, whether your federal tax return lists New Jersey as a home address and the location of your bank accounts.

Your permanent home means a residence that you maintain permanently as your principal residence, whether or not you own it, Hauptman said.

He said your home is not considered permanent if you maintain it only during a temporary period of time to accomplish a specific purpose such as a temporary job assignment. There are, though, specific guidelines for military personnel.

Hauptman said if New Jersey is your domicile, you are considered a resident for New Jersey tax purposes, unless:
1. You did not maintain a permanent home in New Jersey;
2. You maintained a permanent home outside New Jersey; and
3. You did not spend more than 30 days in New Jersey.

“If New Jersey is not your domicile, you are only considered a resident if you maintain a permanent home and spend more than 183 days here,” he said. “Rental income derived from New Jersey property is subject to New Jersey Income tax even if you are a bona fide non-resident.”

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This story was originally published on Feb. 24, 2023.

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.