If you have two homes in two states, what happens to taxes?

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Q. What if anything happens if someone changes their residence to Florida, but subsequently stops living in Florida for the minimum amount of time and spends more time in their New Jersey home? Does either state check the residency status after it has been established?
— Not sure

A. The saying “home is where your heart is” may not always hold true when it comes to state income tax.

There are a few items to juggle here.

First, your domicile is what matters when it comes to state income taxes, said Jeanne Kane, a certified financial planner with OneDigital in Boonton.

She said if you move to a new state — Florida — with the intent to make this state your home base or permanent home, you will establish your domicile in Florida.

Kane said to establish your domicile, you should:

  • Change your driver’s license and passport address
  • Register to vote and register your car
  • Establish relationships with new primary physician, dentist, and other healthcare providers
  • Change your mailing address
  • Notify your bank, insurance companies, Social Security, and any pension and investment accounts that you’ve moved
  • Open a bank account in Florida
  • Join new clubs and places of worship
  • Use your Florida address for tax filings
  • Change your insurance coverage to Florida
  • Execute a new last will and testament declaring Florida as your domicile.

And there are more steps you can take, but you get the picture.

“Essentially, you’re setting down roots in Florida,” Kane said. “It is your home that you will come back to after you go on vacation or travel out of state.”

Kane said you can maintain a second home in New Jersey in addition to your domicile/permanent home in Florida.

However, there are requirements that you need to meet to prove that you are not a New Jersey resident.

“Some states have additional requirements to establishing residency,” Kane said. “New Jersey is one of them.”

If you’ve maintained a residence in New Jersey and you spend more than 183 days in the state, you’re considered a “statutory resident,” Kane said.

Like residents who have New Jersey as their domicile, statutory residents are subject to state income tax on all their income, she said.

So would a state check on whether you are in New Jersey or Florida? Do they care?

“The short answer is yes, particularly if one of the states is a high tax state like New Jersey,” Kane said. “Because New Jersey is a high tax state, it cares about losing valuable taxpayer revenue. New Jersey wants to keep the revenue.”

So what happens?

“If you don’t meet the requirements after you change your domicile, you run the risk of being subject to a New Jersey residency audit and classified as a statutory resident,” she said.

The objective of a New Jersey residency audit is to determine whether you are accurately filing your taxes as a resident, she said. The state wants to ensure that you are paying your fair share of state taxes.

“You’ll pay taxes on all your income if you are determined to be a statutory resident of New Jersey,” she said. “The onus is on you to prove that you are not a New Jersey resident.”

You can do this in several ways, including by keeping detailed records of your travel to and from New Jersey as well as expenses while in the state. Note that travel and partial days in state count toward the 183-day limit.

“A New Jersey residency audit will check your cell phone records, bank statements, E-Z Pass records, and more with the goal of understanding where you spend your time,” she said.

If you have questions about your residency status, speak to a qualified tax professional can help you with your specific situation.

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This story was originally published in March 2024.

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.