Sep 30 Tax Alert: NJ Governor Murphy Signs 2021 Budget
On Tuesday, September 29, Governor Phil Murphy signed New Jersey’s 2021 budget which includes several tax increases, affecting both individual and corporate taxpayers.
For tax years beginning January 1, 2020, the “Millionaire’s Tax” has now been extended to taxable income of $1 million or more. Previously this gross income tax rate of 10.75% was applied to taxable income of $5 million or more.
The law also provides for either $500, or if the taxpayer paid less than that for the tax year, the amount of actual tax paid as rebates to individual taxpayers. To be eligible for the rebate the taxpayer must:
- Be a resident of New Jersey
- Have at least one dependent child
- Have gross income not exceeding $150,000, if filing a joint return or filing as head of household, or as a surviving spouse or $75,000 for single filers.
The 2.5% surtax on corporate taxpayers with New Jersey taxable income exceeding $1 million has been extended through tax year 2023. The surtax rate was originally scheduled to reduce to 1.5% for the tax years beginning on or after January 1, 2020 through December 31, 2021 and eliminated thereafter. The retroactive increase will affect corporate taxpayers’ current tax provisions, estimated payments, and the effective tax rate used to value their deferred tax assets and liabilities. The surtax will be suspended if the federal income tax rate is increased to at least 35%.
Sax will continue to update you as further details are made available. For questions or additional information relating to the New Jersey tax law, please reach out to your Sax advisor.