What You Need to Know About New Jersey Tax Law Changes
Beginning January 1, 2017, New Jersey made some changes to its tax laws. Below are some of the key changes so you can understand their impact on you in the coming years.
By now most of you have heard that NJ lowered its sales tax rates as part of the compromise to get the gas tax increase of 23 cents per gallon. On January 1, 2017, the sales tax rate goes down to 6.875%. Then again on January 1, 2018, it goes down to 6.625%.
Be careful, though. If you are providing services that were done in 2016 but not invoiced until 2017 you are still required to charge the old rate of 7%. The same applies if you sold a product that was delivered in 2016 but not invoiced until 2017.
As mentioned in a previous blog, beginning January 1, 2017, the estate tax exemption amount increased from $675,000 to $2 million. The estate tax is scheduled to be eliminated January 1, 2018. Whether future administrations leave this in place is anyone’s guess.
Don’t forget that the Inheritance tax is NOT going away. So if you leave your estate to people other than direct family members, your estate could still be subject to a tax.
Retirement Income Tax Reduction
The new tax break that will take the longest to phase in is the increase of the state-income exclusion for pensions and other sources of retirement income. This cut will not take full effect until 2020.
Right now the state excludes up to $20,000 of retirement income from the state income tax for married couples filing jointly who have less than $100,000 of annual income. The exclusion is $15,000 for single filers and $10,000 for married individuals who do not file taxes jointly with their spouse.
January 1, the retirement exclusions doubled to $40,000 for married couples filing jointly, $30,000 for single filers and $20,000 for married individuals filing separately.
Eventually the exclusions will increase to $100,000, $75,000 and $50,000 in 2020. If your income exceeds $100,000 this exclusion is eliminated.
As you can see the tax landscape continues to change. While these changes are beneficial, proper planning is always advised to take full advantage of them – call us to find out what you need to do now.