Should I file MD Full time resident and NJ non resident state taxes for receiving NJ unemployment benefits and paid NJ property taxes??

[Sam123]

Trying to figure out how to maximize refund as it seems NJ does not tax unemployment while MD does. Here is the info:

• Moved to MD 
• Received $20k NJ unemployment benefits in 2021 and $0 in MD unemployment benefits
• Husband received w2 in MD
• No other income in NJ besides NJ unemployment 1099-G
• Sold NJ home as primary residence in 2021 so no cap gains but paid $5k in property taxes

What's the best filing option?

• Do I file MD resident, NJ non resident?
• Am I able to pull the NJ unemployment to the NJ non resident form and pull it out of MD taxes
  • Use the NJ unemployment numbers based on 1099 but not pay any taxes as unemployment not taxed and no other w2 income
  • Decrease income in MD by the NJ unemployment number so no tax on this amount
• Does anything happen to the NJ property taxes as would have no income taxable as seems NJ unemployment is not taxable (1099-G)
  • Seems like no property tax deduction as would have no income
• This method would lead to MD tax savings on $20k unemplyment benefits???

***If can't do this, do I just fill out MD resident and include NJ unemployment as income and pay the 8% taxes on it?

******From TurboTax online question page on Maryland Taxes:

Credit for Taxes Paid to Another State

Did you pay taxes to another state or United States territory or possession on income you also included in your Maryland taxable income?

To claim the credit, you must meet these requirements: 

• You must have earned the income in the other location.
• The income must be taxable by the other location.
• The income must be taxable by Maryland.

You cannot take a credit for wages, salaries, or other compensation you earned in Pennsylvania, Virginia, Washington, D.C., or West Virginia.

[ErnieS0]

File two part-year returns for Maryland and New Jersey and report on each return what income was received while you were living in each state.

If you were a part-year resident of New Jersey, you can’t claim yourself as a full-year MD resident and a NJ nonresident.

Maryland does tax unemployment, so any unemployment received while you lived in MD is taxed by MD. States give you a credit on double-taxed income, but because NJ does not tax unemployment, there is no credit.

The income is not reportable to NJ, but reportable and taxed by MD.

Property tax deduction/credit

New Jersey has a property tax deduction/credit. If you have no NJ income, you may qualify for the property tax credit of $50.

NJ Income Tax Property Tax Deduction/Credit for Homeowners and Tenants

Homestead benefit

If you were a NJ resident on October 1, you would qualify for the Homestead Benefit. The benefit is normally a credit on your local tax bill, but a nonresident can get  check.

The Homestead Benefit is paid several years later (NJ is up to 2018), but filing a return will get your info into the system.

Homestead Benefit Program

[Sam123]

As a follow up, I never lived in NJ in 2021 as moved out in 2020 but Unemployment payments came from NJ via 1099 as last job was there but was already full time resident in MD. How would this change the answer?

Any way to do non resident of NJ and put unemployment into NJ form and take away from MD total income to avoid the taxes?

@ErnieS0 Thanks!

[RaifH]

No, the unemployment income is taxed by the state you were residing in when you received it. Since you lived in Maryland all of 2021, the unemployment is taxable by Maryland even if it is from New Jersey.