According to the Tax Foundation, New Jersey’s property tax collections per capita are higher than any other state. Many of our clients, especially seniors, contemplate moving either to escape our cold weather or to escape our notorious property taxes. In an effort to make at least the tax burden a bit more bearable, two bills were passed earlier this year that provide some relief.
Senior Tax Freeze
The Senior Tax Freeze is a godsend to retirees who want to remain in the state. It also applies to those receiving federal Social Security disability benefit payments. As the name implies, it freezes the real estate tax paid on a residence based on the tax amount in the taxpayer’s base year. The base year is when the taxpayer meets the residency, age (or receipt of Social Security disability) and income level to qualify.
Many taxpayers, though, have had the unpleasant experience of qualifying and collecting the property tax reimbursement for years but exceed the income limit in an extraordinary year. This could happen, for example, when a property was sold and a large gain resulted.
Under previous versions of the Senior Tax Freeze, the taxpayer would not collect the reimbursement for that year AND would have the base year reset to a later year when the taxpayer again met the qualifications. This would mean a new frozen property tax base amount when the taxpayer again was under the prescribed income limit. This new base amount would likely be higher due to an increased tax rate and/or higher property assessment since originally qualifying for the Senior Tax Freeze.
Effective June 30, 2023, if the income limit is exceeded, the taxpayer does not qualify in that year for the property tax reimbursement, but, if qualifying in the following year, the amount of the property tax on which the reimbursement is based would go back to the original base year. However, if in the next year the taxpayer again failed to fall under the income limit, a new base year would not be established. Instead, a new base year would wait until the income limit was met, meaning the taxpayer’s reimbursement would likely decrease because it would be based on the taxes frozen as of the later base year.
StayNJ
New Jersey has also passed the StayNJ program that has a target implementation date of January 1, 2026. This bill will provide a tax credit of up to $6,500 to taxpayers over 65 with incomes under $500,000 who own and pay taxes on a primary residence in New Jersey. The coordination of this program with existing real estate tax relief will be determined before 2026.
There’s also something new on the horizon for younger taxpayers, an increased child tax credit. Beginning this year, the credit is double for any child under six at the end of the tax year. The credit is the same regardless of filing status EXCEPT those married filing separately do not qualify for any credit. The income brackets for the credits are unchanged and no credit is available if income exceeds $80,000.
I think that StayNJ says it all. Our legislature knows that the tax burden from living in our state needs to be addressed. We can’t do anything about the snow and ice in the winter, but it is time to make it attractive for young people to live and raise a family and for seniors to enjoy their retirement.
Article Submitted by Lois S. Fried, CPA, CFE, CVA, ABV.
