New Jersey’s budget deal, signed on July 1, 2018, succeeded at averting a government shutdown, but what does it mean for taxpayers in the state?
Here are some of the new tax changes the July New Jersey budget deal put into effect:
- A temporary surcharge on a corporation’s income in excess of $1 million was imposed. The temporary surcharge is set at 2.5% for tax years January 1, 2018 through December 31, 2019 and at 1.5% for tax years January 1, 2020 through December 31, 2021.
- The state also adopted mandatory combined reporting for unitary businesses, as well as market-based sourcing for service revenue, both of which will go into effect beginning January 1, 2019.
- Individuals with income over $5 million will now be subject to a 10.75% rate, regardless of filing status, effective January 1, 2018. In order to accommodate this increased tax rate, employers were advised to adjust withholding no later than September 1, 2018.
- A benefit to taxpayers was included by increasing the property tax deduction from $10,000 to $15,000, beginning in tax year 2018.
- Federal law changes included in the Tax Cuts and Jobs Act, signed in December 2017, were also addressed. The state is specifically disallowing the 20% deduction for qualified business income, disallowing federal deductions against the transition tax on foreign earnings and applying the interest deduction limit on a pro-rata basis.
- Changes to sales and use taxes, as well as other excise taxes, will have an impact on:
- transient accommodations, such as Airbnb, which will now be subject to a hotel fee of 5% plus sales tax beginning October 1, 2018;
- ride fees for companies like Uber and Lyft, which will also experience changes beginning October 1, 2018, with fees set at $0.50 for a single rider, or $0.25 per rider when there are two or more passengers; and
- liquid nicotine used in e-cigarettes, which will now have a tax of $0.10 per milliliter beginning September 29, 2018.
To learn more about these and other tax changes brought about by the New Jersey budget deal, please contact your Untracht Early advisor to learn more.