Tax Alert: New Jersey’s 2019 Fiscal Year Budget Signed
On July 1st, Governor Murphy signed a $37.4 billion budget for fiscal year end 2019, and by doing so avoided a government shutdown.
Here are some highlights of the new budget you should be aware of:
- NJ top tax rate increases from 8.97% to 10.75% for NJ taxpayers with Taxable Income of $5 million and higher. The increase in the top rate makes New Jersey the second highest in the nation (behind California).
- This budget increases the Corporate Business Tax for four years. The surcharge will be 2.5% this year and next, and then lowered to 1.5% for the next two years.
- Airbnb-style homeshare rentals are now subject to Sales Taxes. However, short term or homeshare rentals in the Jersey Shore area will be exempt from sales tax.
- Sales tax will remain at the current rate of 6.625%.
- There is a new surcharge tax on Uber/Lyft-style sharing riding services. The new tax will cost consumers between 25 and 50 cents per ride.
- The law reduces the dividend exclusion amount for taxpayers receiving dividends from an 80% or greater owned subsidiary. The exclusion is reduced from 100% to 95% of the dividends included in federal taxable income.
- Effective for tax years after 2018, sales of services are sourced to New Jersey if the benefit of the service is received in New Jersey (i.e. market based sourcing). This new rule is for sales and income tax purposes.
- Effective for tax years after 2018, New Jersey requires combined income tax reporting for corporations that are members of a unitary business group.
- Effective for tax years beginning after 2017, a taxpayer who is allowed a Federal Child and Dependent Care Credit may also be permitted to claim a state tax credit.
- To help property tax payers, the new budget:
- Increases the state property tax deduction cap from $10,000 to $15,000
- Reinstates the Homestead Rebate Program
Lastly, the New Jersey Division of Taxation will hold a 90-day tax amnesty period that ends no later than January 15, 2019. Qualifying taxpayers will be required to pay the tax due plus 50% of interest accrued with no penalties assessed.
The amnesty will apply to state tax liabilities for tax returns due from February 1, 2009, to September 1, 2017.
The advisors at Sax will continue to keep you updated as relevant updates and information emerge on important legislative matters. If you have any questions or concerns, feel free to reach out to a Sax advisor at (973) 472-6250 or www.saxllp.com.