New Jersey Budget Creates Tax Hikes

New Jersey just passed the budget for its current fiscal year, which includes additional tax hikes. Some of the tax hikes affect corporations, property tax deductions, an increase to income tax rates for certain taxpayers, and alcohol.

If you own a NJ corporation you have probably noticed that over the past several years you have been paying a 4% surtax on your corporate tax liability. For instance, if you owe just the minimum corporate business tax of $500, your actual liability is $520. Unfortunately, this surtax has been extended for one year.

Income tax rates for taxpayers filing jointly have changed if you make over $400,000 as follows. Additionally, the top tax rate increases to 10.75% for those making over $1,000,000. Although this tax change does affect only high income earners, it actually gives high income taxpayers an incentive to move out of state such as to Pennsylvania to save taxes. Only time will tell if this actually happens with any significance.

The property tax deduction has been scaled back so that if you have gross income of more than $250,000 and are younger than age 65 you will not receive a property tax deduction from your NJ taxes. If your income is between $150,000 to $250,000 your deduction will be capped at $5,000.

Wine drinkers, smokers, and anyone who drinks hard alcohol will also pay additional taxes. The tax on cigarettes is now $2.70 per pack, an increase of $12.5 cents. Starting August 1st, the taxes that retailers pay to manufacturers and distributors of hard alcohol, wine, and apple cider (the alcoholic kind) all will increase. Of course the increase to retailers will be passed on to consumers. I think that lawmakers are encouraging us to drink more beer (no tax increase this year) and to quit smoking.

Yes, there is one last tax increase for gamblers – all NJ lottery winnings greater than $10,000 are subject to NJ income tax.