WHAT’S NEW FOR 2018 – THE NJ-1040

While there has been much talk of the changes to federal tax law resulting from the GOP Tax Act, it is also important to take note of the state tax changes – whether they result from the Act or from state tax legislation.

New Jersey is one of the few states that does not follow the format of the federal Form 1040.  So, most of the changes to the federal 1040 will not affect the NJ-1040.  However, the recently passed state budget did make changes to the state income tax.  And there are changes from previous state legislation that will take effect for tax year 2018.

Here is a summary of what is new for 2018 for the NJ-1040 -

(1) A new top tax rate of 10.75% is created for NJ taxpayers with income of more than $5,000,000, regardless of the taxpayer’s filing status.

(2) The Pension Exclusion and Retirement Income Exclusion combined for NJ taxpayers age 62 or older or disabled under Social Security with Total Income of more than $100,000 is –

Single or Head of Household = $45,000

Married Filing Joint = $60,000

Married Filing Separate = $30,000

(3) The maximum deduction for property taxes is increased from $10,000 to $15,000.

(4) There is now a non-refundable state Child and Dependent Care Credit for families with qualified dependents and New Jersey Taxable Income of less than $60,000 who are allowed to claim the federal Child and Dependent Care Credit.    

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 incapable of self-care.

The amount of the New Jersey credit is a percentage of the taxpayer’s federal Child and Dependent Care Credit and is based on New Jersey Taxable Income -

If NJ taxable income is:                       The NJ-1040 credit is:

Not over $20,000                                50% of federal credit

over $20,000 but not over $30,000     40% of federal credit

over $30,000 but not over $40,000     30% of federal credit

over $40,000 but not over $50,000     20% of federal credit

over $50,000 but not over $60,000     10% of federal credit

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

(5) The NJ Earned Income Tax Credit is 37% of the federal tax credit.

(6) New Jersey will not allow the highly publicized and highly convoluted and complicated federal 20% Section 199A deduction for “pass-through” business entities, including federal Schedule C or C-EZ filers, on the NJ-1040.

For more information from the NJ Division of Taxation click here.

TTFN