Tax Implications of Moving From New Jersey to Florida

For individuals considering moving from New Jersey to Florida, there are two relevant tax inquiries: residency for income tax purposes, and domicile for estate tax purposes.  New Jersey imposes an income tax on its residents on worldwide income.  Income taxes may be imposed on nonresidents based upon income earned in New Jersey; however, those looking to establish residency in Florida should be sure that they are no longer considered a “statutory resident” and that they have officially changed their domicile, in order to reduce exposure to the New Jersey tax regime.  With respect to estate planning, New Jersey does not presently impose an estate tax on its residents, although there have been proposals to re-implement an estate tax.  New Jersey does, however, impose an inheritance tax of up to 16% on bequests to beneficiaries who are not lineal descendants. 

Statutory Residence

Even if an individual changes his or her domicile, they will still be considered a “statutory resident” of New Jersey for income tax purposes if they: (1) maintain a permanent home in New Jersey; and (2) are physically present in New Jersey for more than 183 days in the year.

If a taxpayer meets both tests, he is deemed to be a New Jersey statutory resident, and New Jersey will impose a tax on worldwide income for the year (as opposed to nonresidents, who are only taxed on their New Jersey-sourced income).  For this reason, maintaining records of travel, and being aware of the number of days spent in New Jersey each year is of particular importance.

Changing Domicile

Generally speaking, a taxpayer’s domicile is the place the taxpayer considers their permanent home, and those domiciled in New Jersey will be considered New Jersey residents for tax purposes.  While a taxpayer cannot have two domiciles, their domicile will not be changed until the former state of residence is abandoned.  Thus, a taxpayer will be considered domiciled in Florida if he or she is able to prove two elements: (1) the taxpayer must change his or her actual state of residence; and (2) the taxpayer must show an intent to abandon the former state of residence.  The taxpayer bears the burden of proving each element by “clear and convincing evidence.”  Because this is a subjective “facts and circumstances” test which focuses on the intent of the taxpayer, taxpayers wishing to change their domicile must carefully plan their move, and their actions should evidence a change in domicile.  The following is a non-exhaustive list of factors which should be considered when changing domicile:

  1. Sell or lease any property in New Jersey, if possible.
  2. Purchase or lease property in Florida. Maintain your personal belongings in your Florida property (“near and dear” items, including family pictures, jewelry, paintings, etc.).
  3. Spend as much time in Florida as practicable (and more than in New Jersey).
  4. Maintain records of travel to substantiate presence in Florida (g., phone records, EZ Pass records, credit card statements, airline and hotel receipts, etc.), and keep a log of all travel in and out of New Jersey, even for less than one day.
  5. File a Declaration of Domicile and Citizenship in the county of residence in Florida.
  6. Register to vote in Florida and vote in person. Cancel New Jersey voter registration.
  7. Claim Florida homestead exemption from real property taxes before March 1.
  8. File a final part-year resident income tax return in New Jersey, listing your move date as the last day of New Jersey residency. List Florida address on Federal tax returns.  In future years, New Jersey nonresident tax returns may be filed for any New Jersey-sourced income.
  9. Update estate planning documents under Florida law, reciting that you are a resident of Florida.
  10. Obtain a Florida driver’s license and register cars in Florida.
  11. Change address for brokerage accounts and bank accounts to Florida.
  12. Notify credit cards, subscriptions, Social Security Administration, and service providers in former state of your new address. Notify US postal office of your new address, and request that mail be forwarded to the new address in Florida.
  13. Visit doctors and dentists in Florida.
  14. Join local clubs and organizations in Florida.
  15. Use Florida address on legal documents moving forward (contracts, passports, etc.).
  16. Establish a safe deposit box in Florida.
  17. Cancel monthly parking passes in New Jersey.
  18. Transact business in Florida and discontinue performing services in New Jersey.
  19. Consider eliminating the necessity for New Jersey probate by transferring New Jersey properties to a revocable trust, or other business entity.

 

As mentioned above, the determination as to whether a taxpayer has changed domicile is a subjective facts and circumstances test.  As such, it is encouraged that individuals looking to change domicile for tax purposes seek legal counsel to fully assess their own fact pattern.

 

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