NJ taking my BAH as proof I’m a “resident”
State
Lost about $5,500 of my expected refund because NJ decided my military pay is NJ-source income. I'm active duty, NJ home of record, stationed in VA. Wife works in VA, kid was born here, we purchased a home off base.
A buddy in my unit told me I could file as a NJ nonresident this year so I did. Filed NJ-1040NR based on the statute (NJSA 54A:1-2) and GIT-7 (their actual tax bulletin). Both lay out a clean three-condition test. No NJ home, permanent home elsewhere, under 30 days in NJ. I meet all three. Neither mentions BAH anywhere.
Got their adjustment notice. They wound up taxing me as a resident. Didn't say much beyond "wages adjusted per W-2." I had to dig around the NJ Division of Taxation site to find out where they were getting their reasoning from. Eventually found it on two separate webpages.
First, the Notice NZI page: https://www.nj.gov/njbonds/treasury/taxation/notice-nzi.shtml
"If you accept any type of housing allowance or housing subsidy you do not qualify as a nonresident for tax purposes."
Second, the Military Residency page: https://www.nj.gov/treasury/taxation/military/residency.shtml
"If you accept any housing or quarters allowance, you are not considered to be maintaining a permanent home outside New Jersey."
My question: does this webpage guidance actually hold up against the statute? And even if it does, is the logic worth fighting? Their position is that receiving BAH means I'm not maintaining a permanent home outside NJ. How does that follow?
The fact that one specific category of my income is labeled "housing allowance" to pay my mortgage doesn't mean my VA home stops being a permanent home. The logic just doesn't connect.
Is this worth fighting?