Dec
While I usually report mainly Federal income tax issues because of the fact that I have clients and followers in different parts of the country, this article will focus on recent changes made by the State of New Jersey.
New Jersey Estate and Inheritance Taxes
The biggest change to come about recently is that New Jersey has increased its Estate Tax exemption amount form $675,000 to $2,000,000 as of January 1, 2017. This means that individuals with Estates under $2,000,000 as of January 1, 2017 will not have to file NJ Estate tax returns. As of January 1, 2018 New Jersey has totally eliminated the Estate tax.
New Jersey does still have an Inheritance tax and there have been no changes to this tax. The Inheritance tax is imposed on certain classes of beneficiaries. There is no inheritance tax if a New Jersey Estate is left to a Class “A” beneficiary. A class “A” beneficiary is a father, mother, grandparent, spouse or child (including an adopted or step child).
For inheritances left to anyone else there is a tax ranging from 11% to 16% depending on the size of the inheritance and the classification of the beneficiaries. Further explanation of the rates and classes of beneficiaries is beyond the scope of this article.
Sales and Use Tax
The New Jersey sales and use tax rate will drop from 7 percent to 6.875 percent on January 1, 2017 and to 6.625 percent on January 1, 2018.
Gas Tax
As of November 1, 2016 there is an increase of 23 cents per gallon of gasoline.
Retirement Income Exclusion
The New Jersey retirement exclusion will increase from the current 2016 amounts ($20,000 per year for joint filers, $15,000 for individual filers and $10,000 for those married filing separately) to $100,000, $75,000 and $50,000 respectively in year 2020. The amounts increase by $20,000 per year, $15,000 per year and $10,000 per year respectively until the new limits are reached in 2020.
Reciprocal Agreement with Pennsylvania
Since the late 1970s New Jersey and Pennsylvania have had in place a reciprocal agreement under which each state would tax employee wages earned in the other state as if earned in the taxpayer’s state of residence. In other words if a New Jersey company employed a Pennsylvania resident even though normally that employee would have New Jersey withholding, the Company would withhold Pennsylvania taxes and the employee, even though working in New Jersey, would not have to file a New Jersey return. The same held true for New Jersey residents employed in Pennsylvania.
In October notices were sent to employers stating that the reciprocal agreement was to end as of December 31, 2016. On November 22, 2016 Governor Christie reversed his decision and the agreement will remain in place.
Conclusion
There were certainly other changes made to New Jersey tax law recently. I have highlighted what I feel to be the most significant. Once again if you’re not sure, then check with a tax professional to help determine if you are affected by any new legislation.