NJ Tax on 1099-INT for Bank Incentive/Promotion Payments

[gelbermj]

I moved from TN to NJ in early 2022. In 2022, before I moved to NJ, I opened up a bank account in TN and received $200 as an incentive/promotion. I received a 1099-INT for the $200. The bank is not in NJ (only TN and other states in the South). Is this $200 exempt from NJ state taxes (do I check the box in Turbotax "Our state doesn't tax all of this interest" and that choose "New Jersey" in the dropdown menu?

[MonikaK1]

Since New Jersey does not have a special form for part-year filers, you must use the regular resident return, Form NJ-1040. The return provides a line for you to show the period of your residency in the state. TurboTax will prepare the New Jersey return from your entries.

As a part-year resident, you report only the income you earned or received while you were a New Jersey resident. Therefore, you don't need to pay tax on the interest income you received before you moved to New Jersey. 

You must prorate all the credits, exclusions, exemptions, and deductions for which you qualify. That means you can take only that part of the full deduction, credit, exclusion, or exemption that represents the amount of time you were a resident of the state. See this New Jersey webpage for more information.

You would not exempt the income from New Jersey while you are preparing the Federal return. When you are preparing the New Jersey return, complete the interview and follow the prompts in TurboTax for allocating the income for a part-year resident.

See also this TurboTax article and this one on multiple-state situations.

[gelbermj]

Hi @MonikaK1, thank you for replying to my question. I really I appreciate your willingess to help! If I understand your response correctly, I do not have to pay NJ taxes on the $200 as an incentive/promotion I received in TN because at that time, I had not moved to NJ. Is my understanding correct? If so, do I check the box in Turbotax "Our state doesn't tax all of this interest" and that choose "New Jersey" in the dropdown menu? (screen capture included in original post)

[HopeS]

Yes, your understanding is correct. Since the incentive that generated the interest (Form 1099INT) was earned in TN, you should allocate this amount to TN.

Below are examples of how to allocate unearned income:

Allocating unearned income is pretty straightforward: just allocate it to the state you were a resident of when you received it.

• You received three quarterly dividend payments while living in Arkansas, and the remaining dividend while living in Oklahoma. Allocate the first three payments to Arkansas and the last payment to Oklahoma
• You sold some stocks right after you moved to Iowa. Allocate the gain to Iowa.
• You closed an interest-bearing account while still living in California, so you'd allocate 100% of the interest to California
  • On the other hand, if the account remains open, you'd allocate the interest you earned as a California resident to California, and the remainder to your new state. An easy allocation method is to divide the year's interest by 12, and then multiply the figure by the number of months you lived in each state

Click below for more information:

Unearned Income Allocation

@gelbermj