My wife and I live in NJ with our two kids. We are planning to sell in 2021, some of our initial stock options that we received from our start-up (fully vested and exercised more than a year ago). I have significantly more number of stocks than my wife. We would like to minimize our NJ State Income tax liability, as NJ will tax all the gains from our stock sales as regular income for NJ state income tax purposes. I plan to move to either FL or TX for say the whole of 2021, while leaving my wife and kids in NJ. My wife and I will sell our respective stocks while I live in FL or TX for 2021 and she lives in NJ with the kids.
Given this, can we file as 'married filing separately', where my files NJ state tax return (in addition to Federal), and I file a FL or TX state tax return (in addition to Federal)? Per my calculations, our overall Income tax liability (Fed + State) is significantly lower if we file as 'married filing separately', instead of 'married filing jointly', and maintaining status quo of living in NJ. We have always filed as 'Married Filing Jointly' so far.
The Capital gains from our stock sale is likely to be significant. So, some of the factors around a higher income tax rate for Fed, some of the usual deductions not being available etc. get far outweighed by the amount of Income Tax we will end up paying NJ State for the stock sales.
