Part Year and Non Resident Tax Filing - New Jersey

[DNAZMTSD]

We lived in New Jersey until June 22, 2023 and then domiciled/relocated to South Dakota. My husband worked and still does for the same company based out of New Jersey.  How do we break up the taxable income for New Jersey for tax filing purposes?

[RobertB4444]

First, the bottom of your husband's W2 will list the income earned by state.  If it lists all of the income as New Jersey income then you'll need to do some math.  If it lists some as New Jersey and some as South Dakota then the math has been done for you.

When you do your taxes you will need to do a part-year return for New Jersey.  You will put the dates on there that you left the state.  Since South Dakota does not have an individual income tax this will be the only state income tax return you will have to do.

The New Jersey return pro-rates your income based on the percentage of time that you lived there but takes the entirety of your income into account when calculating your taxes.  So it's taxed at a higher rate than most states.

Very important going forward - you need to make sure that your husband has his employer classify his income going forward as South Dakota income.  New Jersey does not tax out of state remote workers for New Jersey sourced income so as long as his employer classifies the income as paid to him in South Dakota then there will be no New Jersey withholding and you won't have to file a New Jersey return for 2024.

@DNAZMTSD 

[DNAZMTSD]

Thanks for the details. To further confirm, if he continues to work from a New Jersey based company and the income is noted as NJ income we will need to file a non-resident tax return for any year that happens - correct?  Only if the income is classified as SD we will not have to file a tax return - please confirm.

What is the math calculation if all income is listed at NJ income - total amount of income divided by 12 months multipled by the number of months lived in NJ?

[RobertB4444]

Correct.  And as non-residents you won't owe New Jersey taxes but filing a return to get withheld money back is a hassle.

Their math is weirder.  They take all of your income as though you had lived in Jersey the full year and decide on the tax on that and then prorate the amount of tax.  It results in a higher tax to New Jersey that way.  

@DNAZMTSD 

[DNAZMTSD]

So the calculation happens automatically when you are processing your taxes using say Turbo Tax or do they wait until you submit your taxes and then calculate based on the date provided?

[ThomasM125]

The tax proration happens when you complete the return in TurboTax, so you will know what the tax is when you complete your return.