Over the weekend, New Jersey Governor Phil Murphy and state lawmakers reached a budget deal and became the last state to pass a budget before the commencement of the July 1 fiscal year. The $37.4 billion budget will raise taxes on New Jersey’s multimillionaires and businesses.
What Taxes are Increasing?
- Under the agreement, New Jersey’s top income-tax rate will increase to 10.75% on filers earning $5 million and above, up from 8.97%. This “millionaire’s tax” is expected to raise an additional $280 million a year in revenue.
- Corporations with net income over $1 million will pay an 11.5% tax for this and next year, representing a 2.5% surcharge. The surcharge will be cut to 1.5% in years three and four before phasing out entirely. The surcharge is expected to generate $425 million in annual revenue.
- Short-term home-share rentals, such as those obtained through Airbnb, will now be subject to sales tax plus the local hotel surcharge for lodgings.
- The state will also collect a 50 cent surcharge on solo rides and 25 cent surcharge on shared rides through ridesharing apps, such as Uber and Lyft.
- A new tax on e-cigarettes will be imposed at 10 cents per fluid milliliter for the sale of liquid nicotine.
- The budget deal did not include a sales tax increase which the Governor previously called for. The state’s sales tax rate will remain at 6.625%.
- Residents will now be able to deduct up to $15,000 per year of property taxes. Historically, the deduction was limited to $10,000.
- Low-income workers who apply for the Earned Income Tax Credit, approximately 500,000 New Jerseyans, will see a small increase of about $53. The budget includes funding for the first of a three-year increase from 35% of the federal tax credit to 40%. About 70,000 state residents will become eligible for a new tax credit to help pay for child and dependent care. This is aimed at households with income below $60,000.
- The budget puts another $150 million into the Homestead property tax program to double the credits homeowners received this past May.
- Delinquent taxpayers will soon have an opportunity to obtain compliance with the Division of Taxation and avoid interest and penalties on their outstanding tax liabilities. The state anticipates collecting $200 million through this tax amnesty program. Program details are expected at a later date.
If you require assistance determining how New Jersey’s fiscal budget will impact you or your business, please contact:
Principal, Director of State and Local Taxation
Principal State and Local Taxation and Tax Controversy