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 resident income tax return. Homeowners and tenants may be eligible for a deduction or credit even if they are not eligible for a homestead benefit. See Eligibility Requirements.
Qualified residents may be able to deduct up to 100% of their property taxes due and paid or up to $10,000, whichever is less. The tax benefit varies depending on the amount of the taxpayer’s taxable income, the amount of property taxes or rent paid, and filing status. For tenants, 18% of rent paid during the year is considered property taxes paid. The minimum benefit is a refundable credit of $50.
To determine whether you will receive a greater tax benefit by taking the deduction or credit, complete Worksheet F contained 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 I 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 whether you received a homestead benefit during 2012, the amount of the benefit, and whether the benefit was paid as a credit on your 2012 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).
Also 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. The principal residence you owned consisted of multiple units.
- 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 lived in more than one qualifying residence during the 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 maintain the same principal residence.
- Senior Freeze Applicants. You file a Property Tax Reimbursement (Senior Freeze) application for the same year.
Residents Not Required to File a Return
Age 65 or older and/or Disabled. Eligible residents, whether homeowners or tenants, who are 65 years of age or older or blind or disabled on December 31 of the tax year and who are not required to file a return because their income is below the minimum filing threshold apply for the credit as follows:
- Homeowners who file only the homestead benefit application will automatically receive their property tax credit with their homestead benefit. If they file an income tax return, these residents should not complete Line 37c, Form NJ-1040 to claim a property tax deduction or Line 49, Form NJ-1040 to claim a property tax credit.
- Tenants and those homeowners who are not eligible for the homestead benefit because on October 1, 2012, they were not homeowners may complete Form NJ-1040-H to claim their property tax credit 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. Residents who are not 65 years of age or older or blind or disabled and who are not required to file a return because their income is below the minimum filing threshold are not eligible for a property tax credit.
Additional information on the property tax deduction or credit is contained in the New Jersey Resident Income Tax Return instruction booklet (Form NJ-1040).