New Jersey estate taxes may see cuts in the upcoming year. Currently, the Garden State is 1 of 2 states that taxes both the estate of the deceased and also its heirs.
As a result of this policy of double taxation, New Jersey’s tax treatment of those who pass away has generated substantial visibility, according to NJ.com.
New Jersey Estate tax policy
While New Jersey levies both an estate tax and an inheritance task, its estate tax exclusion is also the least of any state in the U.S. at $675,000. This figure compares to the federal exemption, which rose to $5.43 million in 2015.
In addition, New Jersey counts real estate, cash, life insurance benefits, retirement accounts and other assets when determining the value of one’s estate, according to The Asbury Park Press NJ.
The inheritance tax applies to any transfers to the decedent’s siblings – or their children’s spouses – that are worth $25,000 or more, the media outlet reported. In addition, the levy, which has a rate between 11 and 16 percent, applies to any transfers of $500 or more to friends or other relatives.
Industry participants and policy analysts have brought up multiple challenges that stem from New Jersey’s current treatment of its residents’ estates. Currently, the Garden State’s low estate tax exclusion results in the jurisdiction exempting the lowest number of taxpayers from facing this burden, according to The Asbury Park Press NJ.
Because the exemption is so low, many consider the estate tax an afterthought and are surprised when they have to pay it, Tedd Vitale, a certified public accountant in Spring Lake Heights, told the news source.
Those who oppose the current estate tax policy emphasize that because the state’s average home value is $296,000, having one’s estate reach a value of $675,000 is not a difficult task, according to NJ.com. Gov. Chris Christie emphasized how this policy affects middle-class families.
“For people who own a house in New Jersey, if they just own their house free and clear and have a little bit of retirement income leftover – and remember what happens here, once you get to $675,000 and $1, the tax isn’t on the $1. It’s on the $675,” Christie said. “This affects most middle class families in New Jersey who own their own home.”
Amid this situation, lawmakers have floated several different proposals that would change how the state treats estate taxes, according to The Asbury Park Press NJ. One state lawmaker who supports the change is state Sen. Steven Oroho, (R-Sussex, Warren, Morris), a certified financial planner.
“It actually chases income out of the state of New Jersey,” Oroho told the news source. “Quite frankly, people know right away, financial planners and estate attorneys, they almost feel like they have a duty to tell their clients: Here’s what it costs in New Jersey, and here’s what it costs elsewhere.”
As New Jersey state lawmakers consider where they will get the money to pay for any change in estate tax policy, many are considering hiking the gas tax, according to NJ.com. Currently, the Garden State has the second-lowest gasoline tax in the nation, totalling 14.5 cents per gallon.
Lawmakers on both sides of the political spectrum will have to work together if they want to hike the gasoline tax, State Assembly Speaker Vincent Prieto (D-Hudson) told the news source.
If New Jersey officials do find a way to change estate tax policy, such a move could have a major impact on residents of the Gardent State, as many are moving to other states to retire because “they simply can’t afford to die here,” Assemblyman Anthony Bucco (R-Morris) told the media outlet.