New Jersey Property Tax Deduction Bill Heads to Governor’s Desk

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By John Herzfeld

Legislation is headed to New Jersey Gov. Phil Murphy’s (D) desk to retroactively allow dedicated advance payments toward anticipated property taxes so they can be deducted on 2017 tax returns.

The state Senate approved the bill ( S-1971/A-3382) March 26 by 38-0 vote, following unanimous Assembly passage Feb. 15. The bill would take effect upon enactment, retroactive to July 1, 2017, and apply to anyone who tried to pay a third- or fourth-quarter property tax installment for tax year 2018 in calendar year 2017.

The bill is part of a batch of proposed New Jersey measures to blunt the impact of the 2017 federal tax act ( Pub. L. No. 115-97), which limited state and local tax (SALT) deductions to $10,000. New Jersey residents pay the highest property taxes in the U.S., aggravating the impact of the lost SALT deductibility.

“The federal SALT reduction was a real kick in the teeth for New Jersey residents,” Sen. Paul Sarlo (D), who sponsored the bill, said in a statement. “This may not be a long-term solution, but it will help homeowners defend themselves who are being unfairly penalized.”

The bill would lift a requirement that a municipality has to pass a resolution in advance to allow tax collectors to receive prepayments toward a property tax or assessment. That would make it possible to pay property tax and assessments at any time during the year, without prior authorization. Overpayments would be refundable within 30 days.

Similar Intent

A second bill ( A-2650/S-2638) with a similar intent passed the Assembly unanimously March 26, moving to the Senate for consideration. That bill would give taxpayers credit for up to $10,000 in prepayments of 2018 property tax on their 2017 state tax returns.

Specifically, the second bill would amend the state’s 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 of 2018 property taxes paid in 2017.

“Federal tax changes can already cause a lot of confusion for residents getting documents ready to file,” Assembly Member Joann Downey (D), a bill sponsor, in a statement. “Homeowners who have prepaid their property taxes should receive credit under the year they paid. The new federal changes take advantage of responsible homeowners and they do not give credit where credit is due.”

To contact the reporter on this story: John Herzfeld in New York at jherzfeld@bloomberglaw.com

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

For More Information

Text of S-1971 is at http://src.bna.com/xnu. Text of A-2650 is at http://src.bna.com/xgl.

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