Separate states and Homeowners deduction

[Ronin10460]

Thank you in advance for your assistance. My wife is retired and we purchased a home in Florida. We are both from NJ. We have been filing, "Married, Jointly" since forever. She will soon be a Resident /Domiciled in Florida. I will remain in NJ working and living in an apartment. The question:

1-What are the benefits of filing, "Married-Separately"?

2- Would she be able to deduct the Real Estate Taxes? 

3- She is retired and has no income, so what would be the purpose of Filing Separately? To take advantage of the Real estate deduction that would not effect her anyway?

4- In NJ, there is no Real Estate Deduction for a 2nd home. So should we just file Married-Jointly since there are no benefits until I become a Florida resident? 

[xmasbaby0 · Accepted solution]

Florida has no state income tax.  So there is nothing for you to file in Florida.

If you were legally married at the end of 2022 your filing choices are married filing jointly or married filing separately.

Married Filing Jointly is usually better, even if one spouse had little or no income. When you file a joint return, you and your spouse will get the married filing jointly standard deduction of $25,900 (+$1400 for each spouse 65 or older)  You are eligible for more credits including education credits, earned income credit, child and dependent care credit, and a larger income limit to receive the child tax credit. 

If you choose to file married filing separately, both spouses have to file the same way—either you both itemize or you both use standard deduction. Your tax rate will be higher than on a joint return. Some of the special rules for filing separately include: you cannot get earned income credit, education credits, adoption credits, or deductions for student loan interest. A higher percent of your Social Security benefits may be taxable. Your limit for SALT (state and local taxes and sales tax) will be only $5000 per spouse. In many cases you will not be able to take the child and dependent care credit. The amount you can contribute to a retirement account will be affected. If you live in a community property state, you will be required to provide additional information regarding your spouse’s income. ( Community property states:  AZ, CA, ID, LA, NV, NM, TX, WA, WI)

 If  you are using online TurboTax to prepare your returns, you will need to prepare two separate returns and pay twice.

https://ttlc.intuit.com/questions/1894449-married-filing-jointly-vs-married-filing-separately

https://ttlc.intuit.com/questions/1901162-married-filing-separately-in-community-property-states

https://ttlc.intuit.com/questions/1894449-is-it-better-for-a-married-couple-to-file-jointly-or-separ...

[44619herman]

I am trying to help my sister out because we had a debate whether or not they need to pay Michigan income taxes.  She and her husband own two houses, one in Michigan and another house in Florida. Her husband has declared residency in Florida while my sister is still a resident of Michigan. (She has a Michigan drivers license while he has a Florida drivers license).  They claim the property tax exemption on their house in Michigan only. They both are retired and get social security along with rental income from a Florida condo that they still own. 

I think for tax purposes, they claim that they live Florida so that they don't have to pay Florida state income taxes. However, they do not file nor pay any State of Michigan income taxes. I think that they since my sister is still a Michigan resident, they need to file Michigan income taxes even though her husband claims to be a resident of Florida. They file as married, filing jointly.  If it matters, they both live together and travel between Michigan and Florida. Whats your opinion on this situation?  Should they be required to file a state tax form in Michigan?

[tagteam]

@44619herman 

See page 6: https://www.michigan.gov/taxes/-/media/Project/Websites/taxes/Forms/2021-IIT-Forms/Book-1040-Instruc...

[Carl]

they claim that they live Florida so that they don't have to pay Florida state income taxes.

Florida does not have a state income tax, and never has.

Each state has their own residency requirements, and those requirements can differ depending on what one is claiming residency for. For example, in FL the term “Florida resident” has different meanings under different parts of Florida law. For income tax purposes, establishing residency in Florida requires physical presence in Florida most of the year. For asset protection, there is no minimum occupancy requirement to be a Florida resident.

[44619herman]

Thanks everyone for providing some answers. The statement they claim that they live Florida so that they don't have to pay Florida state income taxes was suppose to say they claim that they live in Florida so that they don't have to pay Michigan State income taxes. The reason that the husband changed his drivers license and legal address to Florida, car license plates and voters card (and also claims to live in Florida for183 days is to prove his Florida residency.  However, my sister still has a Michigan driver's license, votes in Michigan.

The question remains if they claim their Michigan house as their homestead exemption, live in Florida for 183 days and each have different state residency's shouldn't they at least have to file Michigan state income taxes?  Or file seperately rather than married filing jointly?

[NCperson]

@44619herman - might be best to read the preamble to this MI form

sounds like you sister is 'domiciled' in MI and is required to file a MI tax return because she can't satisfy the 3rd condition.  Can your brother-in-law satisfy all three conditions? maybe he is still domiciled in MI as well. 

Your domicile is where you have your permanent home. It is the place you plan to return to whenever you go away. You may have several residences,  but you can have only one domicile at a time (MCL 206.18). That domicile continues until a new permanent home is established. Once established, your domicile can only change when all of the following criteria are met:
1. You have a specific intent to abandon your old domicile,
2. You have a specific intent to acquire a new domicile, and
3. You are physically living in your new domicile.

https://www.michigan.gov/taxes/-/media/Project/Websites/taxes/Forms/All-Years/3799.pdf?rev=d5f7a64f8...).