What You Need to Know about NJ Tax Law Changes

November 29, 2016 News

By Laurie J. Vitullo, CPA

 

The New Jersey and Pennsylvania Reciprocal Tax Agreement-

The 38 year old agreement where tax is withheld where you live as opposed to where you work remains in effect. New Jersey does not collect income taxes from people living in Pennsylvania and working in New Jersey. And in return, Pennsylvania doesn’t collect income taxes from people living in New Jersey and working in Pennsylvania. Instead, Pennsylvania residents report and pay tax on income earned in New Jersey on a Pennsylvania tax return. The same is true for New Jersey residents reporting and paying taxes on income earned in Pennsylvania on a New Jersey tax return.

 

New Jersey Transportation Trust Fund and Tax Relief Agreement-

Starting November 1, 2016, NJ gas tax has increased by 23 cents per gallon. This legislation also implemented various tax relief measures.

 

Phasing out of the Estate Tax:

  • Starting January 1, 2017, the exclusion threshold for the estate tax will be raised to $2 million.
  • On January 1, 2018, the estate tax will be completely eliminated.

 

Increases in the Retirement income Exclusions:

Increases the NJ Gross Income Tax pension and retirement income exclusions over the next four years for NJ taxpayers who are at least 62 years old, retired and have gross income of $100,000 or less.

 

 

Filer Type

 

 

Present

 

2017

 

2018

 

2019

 

2020

 

Joint

 

 

$20,000

 

$40,000

 

$60,000

 

$80,000

 

$100,000

 

Single

 

 

$15,000

 

$30,000

 

$50,000

 

$60,000

 

$80,000

 

Separate

 

 

$10,000

 

$20,000

 

$30,000

 

$40,000

 

$50,000

 

Decreases in the Sales and Use Tax:

  • Starting January 1, 2017 decrease from 7 percent to 6.875.
  • On January 1, 2018 additional decrease to 6.625 percent.

 

New Personal Exemption for Veterans:

Beginning in 2016, additional personal exemption of $3,000 for veterans who have been honorably discharged or released under honorable circumstances from active duty in the United States Armed Forces, reserve or the National Guard of New Jersey in a federal active duty status.

 

Increasing NJ EITC Benefit:

For years beginning on or after January 1, 2016 the EITC benefit increases to 35 percent of the federal EITC from 30 percent.