Oct 14 Living and Dying in New Jersey Just Got More Affordable
On October 14, 2016, Governor Christie signed a bill that represents a big step forward in helping both New Jersey residents and the state itself. Residents will reap the benefits of a reduction in sales tax, increase in the retirement income exclusion, increase in the earned income credit and a new personal exemption for veterans.
The bill also includes the long-awaited elimination of the state’s estate tax, a move which is intended to improve New Jersey’s reputation among business owners and keep more high-net-worth residents in the state.
In turn, the state will lose its notoriety for being one of only two states that still have both the estate and inheritance tax. The bill will also improve New Jersey’s ranking among states with the highest rates of state taxes.
Breakdown of Tax Changes
The bill increases the estate tax threshold from the current $ 675,000 to $2,000,000, effective January 1, 2017. The tax will be eliminated altogether on January 1, 2018.
The sales tax, currently at 7%, will be reduced to 6.875% on January 1, 2017 and further decreased to 6.625% on January 1, 2018.
The current retirement exclusion is $20,000. Beginning in 2017, it will increase by $20,000 each year until 2020, at which time $100,000 of retirement income will be exempt from state income taxation.
The earned income tax credit was also expanded to provide a higher credit to lower income families. It will increase from 30 to 35 percent, effective in the 2016 tax year.
In addition, New Jersey veterans who have been honorably discharged from active service in the military or National Guard will now receive a personal exemption on state income tax to make their lives more affordable in our state.
Lastly, the bill does provide for one tax increase. The state gas tax will be raised from the current 14.5 cents to 37.5 cents to help finance an 8-year extension of the Transportation Trust Fund.
Overall, it is anticipated that the bill’s provisions will have a significant, long-term benefit for the state of New Jersey, making us more competitive, advancing our reputation, and encouraging capital investment in the Garden State.
For more information on this legislation, please contact Sax Partner Kathleen Alexander, CPA, MST, CFE, at (973) 472-6250 or [email protected].