New Jersey, long known for its high property and income taxes, is trying to reverse course with a number of friendly legislative changes targeting the elderly, veterans and low-income workers.
Retired receive tax shelter
While New Jersey isn't the only state to tax elderly on their limited income, legislators have agreed to raise the minimum threshold. News Works reported that this year, retired elderly will be able to exclude $40,000 of pension and retirement from state income tax—double what they could the previous year. This figure will rise to $100,000 for joint-filers by 2020, and $75,000 for single filers.
"For most people who are retired, they're living on Social Security, which New Jersey does not tax, and they're living on either pensions or IRA distributions," Bernard Kiely, a certified financial planner, told the news source. "So, a whole lot of retirees will no longer pay New Jersey income tax."
An income tax break will also be extended to veterans, and tax credits given to low-income workers will increase from 30 percent to 35 percent of what the Federal government previously gave, according to New Jersey TV Online. The source reported this amounts to roughly $200.
Also factoring into the picture is the removal of the state's estate tax. While it will jump to $2 million this year, it is currently scheduled to be completely erased from existence in 2018.
Other changes underway
New Jersey seems to be in a state of perpetual tax change this year. By getting rid of the estate tax—a major point of contention for many elderly looking to leave money to their heirs—NJTV Online reported that the state is losing out on roughly $1.4 billion in annual revenue.
Although the $0.23 gas tax hike at the pump will add $1.2 billion to the operating budget, this money is strictly reserved for transportation proposals, and doesn't necessarily completely fill the gap left by the estate tax, according to NJTV Online.
Other changes include a slight reduction in the state sales tax—from 7 percent to 6.875 percent in 2017 and then to 6.625% in 2018—and a $0.06 cent increase in minimum wage, to bring the minimum hourly compensation to $8.44. This is the first improvement in the minimum wage two years.
It's clear big changes are ahead in the New Jersey tax arena, though it's still relatively unclear as to how the state will make back the revenue.
Do you have any questions? Would you like to discuss the matter further? If so, please contact me, Jeffrey Pittard, at 201-806-3364.