@user17597544422 wrote:
Got it thank you and when you say all worldwide income, should we be reporting her income even before she was in New Jersey (pre-October) in our joint return?
I do want to ask another expert about the residency issue @pk
To file jointly, you must treat your spouse as if they were a US resident for the entire year. That means you report on their federal return, all their world-wide income. The IRS will give a partial deduction or tax credit to offset double-taxation if she also paid income tax on the same money to the other country.
When you move on to your NJ state return, all the federal income will automatically flow to the state, that includes any foreign income you report on the federal return. NJ will allow some state-specific additions and subtractions, but you are not allowed to subtract your wife's income from before she physically moved to NJ. This is because, if you file jointly and you were an NJ resident for the whole year, your spouse is also considered an NJ resident for the whole year. NJ will give a tax credit for income tax paid to another US state, but will not give a credit for income tax paid to a foreign government.
If you want your spouse's pre-NJ income to not be taxed, you will both have to file using married filing separately status. That usually results in higher federal taxes, but in this case that might be offset by not paying NJ taxes on income from Canada. You would have to try it both ways to see.
