New Gross Income Tax Rate for Taxpayers Earning Over $5,000,000
New Withholding Rate for Remainder of 2018
(P.L. 2018, c.45)
New legislation enacted on July 1, 2018, made several changes to the New Jersey Gross Income Tax Act as part of New Jersey’s fiscal year 2019 budget. Among the changes, the new law increases the gross income tax rate for income over $5,000,000 and provides a new withholding rate for the remainder of 2018.
Effective January 1, 2018, income of more than $5,000,000 is taxed at 10.75%, regardless of the taxpayer’s filing status. Beginning as soon as possible, but no later than September 1, 2018, employers must withhold gross income tax at the rate of 15.6% from salaries, wages and other remuneration paid for services rendered in excess of $5,000,000 during the taxable year. This higher withholding rate allows taxpayers affected by the rate increase to “catch up” on their withholdings for the year since the new tax rate is retroactive to January 1.
The Division of Taxation won’t impose interest or penalties for insufficient payment of estimated tax and/or withholdings that may otherwise be due before September 1, 2018, if the insufficiency is a result of the new tax rate.
Please see the revised NJ-WT, New Jersey Income Tax Withholding Instructions for updated Tables for Percentage Method of Withholding.