New Jersey allows only certain deductions from income, see below. Federal deductions such as mortgage interest, employee business expenses, moving expenses, and IRA and Keogh Plan contributions are not allowed on the New Jersey return.
Full-year residents may deduct only amounts paid during the tax year. Part-year residents may only include those amounts paid while they were New Jersey residents.
Certain medical expenses that exceeded of 2% of your gross income may be deducted. In general, medical expenses allowed for federal Income Tax purposes are allowed for New Jersey purposes. Only medical expenses for yourself, your spouse/civil union partner or domestic partner, and your dependents qualify. These expenses must not be reimbursed by your insurance or similar provider. Some examples of allowable medical expenses are: payments for doctor's visits, dental care, hospital care, eye examinations, eyeglasses, medicine, and x-rays or other diagnostic services directed by your physician or dentist. Insurance premiums, including amounts paid under Social Security for Medicare, can be used as medical deductions. You may also deduct transportation costs which are allowable on your Federal return. If you deduct medical expenses in one year and are reimbursed in the next, you must include the reimbursement as income in the year you receive the payment.
Archer MSA Contributions.
New Jersey follows the federal guidelines for deducting qualified Archer MSA contributions. Your contribution may not be more than 75% of the amount of your annual health plan deductible (65% if you have a self-only plan). You must enclose federal Form 8853 with your New Jersey tax return if you claim this deduction. Excess contributions that you withdraw before the due date of your tax return are not taxable. However, you must report the earnings associated with the excess contributions you withdraw as wages on the "Wages, salaries, tips, and other employee compensation" line of your tax return.
Self-Employed Health Insurance Deduction.
If you are considered self-employed for federal tax purposes, or you received wages in 2016 from an S corporation in which you were a more-than-2% shareholder, you may deduct the amount you paid during the year for health insurance for yourself, your spouse/civil union partner or domestic partner, and your dependents. Your deduction may not be more than the amount of your earned income, as defined for federal tax purposes, from the business under which the insurance plan is was established.
Note: For federal purposes you may be able to deduct amounts paid for health insurance for any child of yours who was under age 27 at the end of 2016. However, for New Jersey purposes you may deduct such amounts only if the child was your dependent. For more information, see Technical Advisory Memorandum TAM 2011-14.
Alimony and Separate Maintenance Payments. You may deduct any alimony and separate maintenance payments made that were required under a decree of divorce/dissolution or separate maintenance. Do not deduct payments paid for child support.
Qualified Conservation Contributions. You may deduct any contribution you made for conservation purposes of a qualified real property interest in property located in New Jersey. The deduction is the amount of the contribution allowed as a deduction in calculating your taxable income for federal purposes. If you file federal Form 8283, enclose a copy with your New Jersey tax return.
Health Enterprise Zone Deduction. Eligible taxpayers who provide "primary care" medical and/or dental services at a qualified practice that they owned and that was located in or within five miles of a Health Enterprise Zone (HEZ) may be able to deduct a percentage of the net income from that practice on their tax return. Partners and S corporation shareholders of a qualified practice enter the HEZ deduction amount listed on Schedule NJK-1, Form NJ-1065, or Schedule NJ-K-1, Form CBT-100S. Sole proprietors must calculate the amount of their HEZ deduction. See Technical Bulletin TB-56, Health Enterprise Zones, for eligibility requirements and how to calculate the HEZ deduction.
Alternative Business Calculation Adjustment. If you have losses in certain business-related categories of income, you may be able to use those losses to calculate an adjustment to your taxable income. In addition, you can carry forward unused losses in those categories for up to 20 years to calculate future adjustments. The categories of income that are included in the adjustment calculation are: net profits from business; net gains or net income from rents, royalties, patents, and copyrights; distributive share of partnership income; and net pro rata share of S corporation income. Complete Schedules NJ-BUS-1 and NJ-BUS-2 to calculate the amount of the adjustment or loss carryforward.
Property Tax Deduction/Credit. New Jersey homeowners and tenants may also qualify for either a Property Tax deduction or a refundable Property Tax credit.