Homeowners and tenants who pay Property Taxes, either directly or through rent, on their principal residence in New Jersey may qualify for either a deduction or a refundable credit on their New Jersey Income Tax return (see Eligibility Requirements). Homeowners and tenants may be eligible for a deduction or credit even if they are not eligible for a Homestead Benefit.
The Property Tax deduction reduces your taxable income. Your tax benefit varies depending on your taxable income, the amount of your Property Taxes or rent, and your filing status. You may be able to deduct up to 100% of your Property Taxes due and paid or up to $10,000, whichever is less. For tenants, 18% of rent paid during the year is considered Property Taxes paid. The Property Tax credit reduces your tax due. The credit increases the total payments and/or credits on your tax return. These payments and/or credits are subtracted directly from your tax liability. The minimum benefit is a refundable credit of $50.
You can claim only one of these benefits on your tax return. To determine whether you will receive a greater tax benefit by taking the deduction or credit, complete Worksheet G in the New Jersey Resident Income Tax Return instruction booklet (Form NJ-1040), unless you are claiming a credit for taxes paid to other jurisdictions. Complete Schedule A and Worksheet J if you claim a credit for taxes paid to another jurisdiction. If you are using NJ WebFile, the program will determine the greater benefit for you.
Amount of Property Taxes/Rent for Property Tax Deduction/Credit Calculation
If you are a homeowner, you must know if you received a Homestead Benefit during 2016, the amount of the benefit, and whether the benefit was paid as a credit on your 2016 Property Tax bill or in the form of a check in order to calculate the correct amount of Property Taxes paid. Homeowners should review the instructions for completing Line 37a in the New Jersey Resident Income Tax Return instruction booklet (Form NJ-1040).
Review the information on determining the amount of Property Taxes to use when calculating your deduction or credit if any of these circumstances apply to you:
- Multiple Owners. You shared ownership of your principal residence with anyone other than your spouse/civil union partner.
- Multiple Units. Your principal residence was a unit in a multi-unit property you owned.
- Multiple Tenants. You occupied and shared rent for an apartment or other rental dwelling unit with anyone other than your spouse/civil union partner.
- Multiple Residences. You had more than one New Jersey residence during the tax year.
- Part-Year Residents. You lived in New Jersey for only part of the year.
- File Separate Returns but Maintain Same Principal Residence. You and your spouse/civil union partner file separate tax returns but maintained the same principal residence.
- Senior Freeze Applicants. You file a Senior Freeze (Property Tax Reimbursement) application for the same year.
Residents Not Required to File a Return
Age 65 or Older and/or Disabled. If you (or your spouse/civil union partner if filing jointly) were 65 or older or blind or disabled on December 31 of the tax year and your income was below the filing threshold amount for your filing status, and you satisfy the eligibility requirements, apply for the credit as follows:
- Homeowners who are eligible and file Homestead Benefit applications will automatically receive their Property Tax credits with their Homestead Benefit. If they file tax returns, these residents should not complete Line 38, Form NJ-1040 to claim Property Tax deductions or Line 49, Form NJ-1040 to claim Property Tax credits.
- Tenants and those homeowners who are not eligible for the Homestead Benefit because on October 1, 2016, they were not homeowners may complete Form NJ-1040-H to claim their Property Tax credits or they may claim the Property Tax credit on Form NJ-1040. These residents should not file both Form NJ-1040 and Form NJ-1040-H.
Under Age 65 and NOT Disabled. If you are not required to file a return because your income was below the filing threshold amount for your filing status, you are not eligible for a Property Tax credit.
For more information on the Property Tax deduction or credit, see the New Jersey Resident Income Tax Return instruction booklet (Form NJ-1040).