Recent Tax Law Changes in New Jersey

In the past month there have been several important changes to the New Jersey Gross Income Tax Act. The changes include increases in the New Jersey Earned Income Tax Credit and the property tax deduction, and the addition of a new Child and Dependent Care Credit for resident taxpayers.

These changes affect the returns that taxpayers will file beginning in tax year 2018.

Earned Income Tax Credit (EITC)

Currently, qualified taxpayers are eligible for a New Jersey EITC equal to 35 percent of their federal earned income credit. The new law increases the percentage as follows:

37 percent in tax year 2018
39 percent in tax year 2019
40 percent in tax year 2020 and thereafter

Property Tax Deduction

Qualified homeowners and tenants are eligible for a deduction for property taxes they paid for during 2018 on their New Jersey principal residence. The new law increases the maximum Property Tax deduction from $10,000 to $15,000.

Child and Dependent Care Credit

The law creates a gross income tax credit for  resident taxpayers who are allowed a federal credit for expenses they incur for the care of one or more qualifying individuals. A qualifying individual can be a child under age 13 or a spouse or dependent who lived with the taxpayer for more than half the year and is physically or mentally unable for self-care.

Taxpayers may be able to claim the New Jersey Child and Dependent Care Credit if they:

Paid expenses for the care of one or more qualifying individuals so that they are able to work or actively look for work;

Are allowed the federal child and dependent care credit; and

Have New Jersey taxable income of $60,000 or less.

The amount of the New Jersey credit is a percentage of the taxpayer’s federal child and dependent care credit and varies according to the amount of the taxpayer’s New Jersey taxable income.

The maximum New Jersey credit cannot exceed $500 for one qualifying individual or $1,000 for two or more qualifying individuals.

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