On July 1, 2018, Governor Murphy signed into law a $37.4 billion state budget for fiscal year 2019, avoiding a government shutdown. As a result of the budget, many New Jersey taxpayers will see changes in their state tax bills.
Note: the actual tax legislation has not been finalized. The following is our best judgement of what it will say when it is finally enacted.
Corporation Business Tax
Beginning in 2018 and ending in 2021, a surtax will be imposed on corporations which are subject to the CBT whose net income exceeds $1 million. As a result of the surtax, which is 2.5% in tax years ending 2018 and 2019, and 1.5% in tax years ending 2020 and 2021, those corporations will see an increase in their tax rate during these years from 9% to 11.5% and 10.5%, respectively. The surtax is eliminated in its entirety in year five.
Other provisions that will impact corporate taxpayers include the adoption of combined reporting and adjustments for dividends received and net operating loss carryovers.
Individuals
As expected, the budget calls for a "millionaire's tax" which will be implemented by increasing the top income tax rate for taxpayers with income of $5 million or more to 10.75% (up from 8.97%).
On a positive note, the NJ cap on the property tax deduction available to individuals has increased from $10,000 to $15,000. There will also be slight increases to the New Jersey earned income tax credit, available to low-income wage earners, and more funding available for the Homestead property tax program for eligible homeowners.
Retail Transactions
The budget calls for the New Jersey sales tax to be imposed on short-term transient accommodations of less than ninety days in duration (such as those arranged through online websites like Airbnb and Home Away).
Effective October 1, 2018, the state will also impose a rideshare tax of $.50 per solo rides/$.25 per shared rides beginning and ending in New Jersey which are prearranged through ridesharing applications (such as Uber and Lyft).
Amnesty
The Division of Taxation will open a 90-day tax amnesty period, details of which are to be released in the future.
Omitted
Not included in the final budget were an additional 1% tax on sales of properties in excess of $1 million or an increase in the sales and use tax rate (which remains at 6.625%).
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.