New Jersey Bill Would Credit Prepaid Property Taxes

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Leslie A. Pappas Philadelphia Staff Correspondent Ryan C. Tuck Washington Deputy News Director

By Leslie A. Pappas

New Jersey would give taxpayers credit for up to $10,000 in prepayments of 2018 property tax on their 2017 state tax returns under a bill that moved out of committee March 22.

A.B. 2650, introduced Feb. 1 by Assembly Democrats Roy Freiman and Joann Downey, would amend the state’s existing tax code to allow a gross income tax deduction for advance property tax payments by homeowners. The bill would allow a “one-time additional deduction” of up to $10,000 for 2018 property taxes that were paid in advance in 2017.

The Assembly’s Appropriations Committee voted unanimously March 22 to release the bill, which the full Assembly could vote on as soon as March 26. The bill has yet to be discussed in the Senate.

The proposal is one of many legislative fixes that New Jersey is considering to counteract the tax burdens resulting from the 2017 federal tax act ( Pub. L. No. 115-97). The new law limited deductions of state and local taxes to $10,000, a blow to many New Jersey residents, who pay the highest property taxes in the country.

Under New Jersey’s current tax code, taxpayers can’t take deductions or credits for 2018 property tax prepayments on their 2017 New Jersey income tax returns, according to a state and local government committee statement on the bill.

“This bill will reverse this policy and give the taxpayer a choice to take the pre-payment either under the 2017 additional deduction or as part of the 2018 property tax deduction which is limited to $10,000,” the statement says.

The committee amended the original bill to clarify that the advance payment deduction for 2017 is subject to a separate $10,000 limit and is in addition to the current statutory limit of $10,000 for regular tax year property tax payments, the statement says.

Federal Uncertainty

New Jersey has been working since last year to ease property tax burdens in response to the federal tax overhaul. Just before he left office, former Gov. Chris Christie (R) issued an executive order directing municipalities to accept and credit prepayments for 2018 property taxes if paid by Dec. 31, 2017.

The IRS has cast doubt on whether those prepayments will result in a federal deduction in 2017, however. The IRS issued guidance in December ( IR-2017-210) that said taxpayers could only deduct prepayments on their 2017 returns if the levy had been assessed in 2017.

If enacted, the act would take effect immediately and be retroactive to Dec. 22, 2017.

To contact the reporter on this story: Leslie A. Pappas in Philadelphia at lpappas@bloomberglaw.com

To contact the editor responsible for this story: Ryan C. Tuck at rtuck@bloombergtax.com

For More Information

Text of A.B. 2650 is at http://src.bna.com/xgl.

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