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taxquestion2016
Level 2

Husband and wife living and working in different states - How to file

Dear Tax Expert, 

 

During the tax year 2019, I lived and worked in NJ and my income source is in NJ. My spouse lived and worked in Maryland, and the source of income is in Maryland. I traveled to Maryland to meet my family only during some weekends. My spouse owns a home in Maryland. I do not have any ownership in this Maryland home. My driver's license and vote are in Maryland. We are planning to file our federal taxes jointly. The question we are having is regarding the state taxes. I consulted independent CPAs but I did not get a clear answer. 

 

  1. If we file federal jointly, are we allowed to use married filing separately for NJ and MD?
  2. As I have a MD license and voting address, am I liable for taxes in Maryland? I did not stay in Maryland for more than 50 days in the whole year 2019. 
  3. If we use married filing jointly in NJ, will my spouse's income be taxable in NJ (not from NJ source)?
  4. If we use married filing jointly in MD, will my income be taxable (mine is not from MD source)
  5. If we use married filing jointly for states, will both the states tax our income - will we end up paying more in taxes as we are paying to two states (double taxation?)?

Thank you for your time.

1 Best answer

Accepted Solutions
Hal_Al
Level 15

Husband and wife living and working in different states - How to file

A clear answer is going to be hard to find.  Your situation is complicated and requires expertise in 2 states.  Here's my shot (I'm not specifically knowledgeable on NJ or MD):

Q1. If we file federal jointly, are we allowed to use married filing separately for NJ and MD?

A1. Yes for MD,  "yes, but" for NJ. 

https://www.rosenbergmartin-tax.com/news/to-file-jointly-or-separately-considerations-for-married-co...

"In most cases, if you are married and file a joint Federal return with your spouse, you must file a joint New Jersey return." "Nonresidents: If both you and your spouse were nonresidents of New Jersey during the entire taxable year, and only one of you earned, received, ore acquired income from New Jersey sources, the spouse who had income from New Jersey sources may file a separate New Jersey return (Form NJ-1040NR), even though you filed a joint Federal return. You have the option of filing a joint return, but if you do, joint income must be shown on your nonresident return"

https://www.state.nj.us/treasury/taxation/pdf/pubs/tgi-ee/prior_years/git4_1203.pdf

 

Q2. As I have a MD license and voting address, am I liable for taxes in Maryland?

A2. Yes see Q/A 4

 

Q3. If we use married filing jointly in NJ, will my spouse's income be taxable in NJ (not from NJ source)?

A3. No. You have to allocate the income. 

 

Q4. If we use married filing jointly in MD, will my income be taxable (mine is not from MD source)

A4.  Yes. You are a MD resident (My driver's license and vote are in Maryland). MD will give you a credit for the tax you pay NJ.

 

 

 

Q5. If we use married filing jointly for states, will both the states tax our income - will we end up paying more in taxes as we are paying to two states (double taxation?)?

A5. Effectively no. You just have complicated returns to do to allocate income and apply credits.  You are at some risk of NJ calling you a resident for tax purposes and double taxing (only) your income.  In that situation, one state will still (usually) give you a credit for the other state.   When you file the NJ non-resident return, use your MD address, to ward off that possibility.

 

 

 

View solution in original post

2 Replies
Hal_Al
Level 15

Husband and wife living and working in different states - How to file

A clear answer is going to be hard to find.  Your situation is complicated and requires expertise in 2 states.  Here's my shot (I'm not specifically knowledgeable on NJ or MD):

Q1. If we file federal jointly, are we allowed to use married filing separately for NJ and MD?

A1. Yes for MD,  "yes, but" for NJ. 

https://www.rosenbergmartin-tax.com/news/to-file-jointly-or-separately-considerations-for-married-co...

"In most cases, if you are married and file a joint Federal return with your spouse, you must file a joint New Jersey return." "Nonresidents: If both you and your spouse were nonresidents of New Jersey during the entire taxable year, and only one of you earned, received, ore acquired income from New Jersey sources, the spouse who had income from New Jersey sources may file a separate New Jersey return (Form NJ-1040NR), even though you filed a joint Federal return. You have the option of filing a joint return, but if you do, joint income must be shown on your nonresident return"

https://www.state.nj.us/treasury/taxation/pdf/pubs/tgi-ee/prior_years/git4_1203.pdf

 

Q2. As I have a MD license and voting address, am I liable for taxes in Maryland?

A2. Yes see Q/A 4

 

Q3. If we use married filing jointly in NJ, will my spouse's income be taxable in NJ (not from NJ source)?

A3. No. You have to allocate the income. 

 

Q4. If we use married filing jointly in MD, will my income be taxable (mine is not from MD source)

A4.  Yes. You are a MD resident (My driver's license and vote are in Maryland). MD will give you a credit for the tax you pay NJ.

 

 

 

Q5. If we use married filing jointly for states, will both the states tax our income - will we end up paying more in taxes as we are paying to two states (double taxation?)?

A5. Effectively no. You just have complicated returns to do to allocate income and apply credits.  You are at some risk of NJ calling you a resident for tax purposes and double taxing (only) your income.  In that situation, one state will still (usually) give you a credit for the other state.   When you file the NJ non-resident return, use your MD address, to ward off that possibility.

 

 

 

taxquestion2016
Level 2

Husband and wife living and working in different states - How to file

Thank you

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