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Property Tax Deduction/Credit
Homeowners and tenants who paid property taxes during the year, either directly or through rent, on their principal residence in New Jersey qualify for either a deduction from taxable income or a refundable credit on their resident income tax return. Homeowners and tenants may be eligible for a deduction or credit even if they are not eligible for the FAIR rebate.
Schedule 1-A Replaces Schedule HR-A. Schedule 1-A, which replaces Schedule HR-A, must be completed by residents who: had more than one New Jersey residence during the year; owned a principal residence with more than one unit; shared ownership of their principal residence with anyone other than a spouse; or shared rent for an apartment or other rental dwelling with anyone other than a spouse. Schedule 1-A is used to calculate the amount of property taxes and/or rent to be used on Schedule 1 (or Schedule A and Worksheet F). Taxpayers complete Schedule 1 (or Schedule A and Worksheet F) to determine whether they receive a greater tax benefit from the property tax deduction or the property tax credit.
Schedule 1-A is included in the NJ-1040 instruction booklet. Taxpayers are not required to submit this schedule with their income tax return but should retain a completed copy for their records.
Seniors or Blind/Disabled Persons with Income Below Minimum Filing Threshold Applying for the Credit. Eligible residents who are 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 apply for the credit as follows:
—Eligible residents who file only the FAIR rebate application will automatically receive their property tax credit with their FAIR rebate. These residents should not complete Line 36, Form NJ-1040 to claim a property tax deduction or Line 44, Form NJ-1040 to claim a property tax credit even if they file an income tax return.
—Residents who are not eligible for the FAIR rebate because on October 1, 2004, they were neither homeowners nor tenants may complete the New Jersey income tax return to claim their property tax credit. Such taxpayers must complete Line 44, Form NJ-1040 to claim their property tax credit.
Taxpayers who are members of a domestic partnership registered in New Jersey on the last day of the tax year may claim an exemption for their domestic partner only if the domestic partner does not file a New Jersey income tax return. A copy of the New Jersey Certificate of Domestic Partnership must be enclosed the first time the exemption is claimed and the taxpayer may be asked to provide additional information at a later date.
Increased Tax on Income Over $500,000
For tax years beginning on or after January 1, 2004, the New Jersey gross income tax rate on income over $500,000 has increased from 6.370% to 8.970%.
Filers with income over $500,000 will not be able to TeleFile.
Credit for Taxes Paid to Other Jurisdictions
The Philadelphia nonresident wage tax rate for 2004 is .038801.
Property Tax Reimbursement
The Property Tax Reimbursement (PTR) Program reimburses senior citizens or disabled persons for property tax increases. Eligible residents must file a 2004 Property Tax Reimbursement Application (Form PTR-1 or PTR-2) by June 1, 2005.
Income Limits. For residents applying for reimbursements for tax year 2004, total annual income must be less than:
For 2003: $40,028 if single, or $49,082 (combined income) if married, and
For 2004: $40,869 if single, or $50,113 (combined income) if married.
Note: Benefits available under this program may be affected by State budgetary constraints.
New Jersey income tax law has decoupled from certain changes in Federal depreciation and expense deduction limits. A New Jersey depreciation adjustment may be required for assets placed in service on or after January 1, 2004. The New Jersey adjustments affect the determination of income in the categories net profits from business; net gains or income from disposition of property; net gains or income from rents, royalties, patents, and copyrights; income from estates or trusts; distributive share of partnership income; and net pro rata share of S corporation income. Taxpayers must complete the Gross Income Tax Depreciation Adjustment Worksheet GIT-DEP to calculate the adjustment.
E-Filing Requirement for Practitioners
Tax practitioners who prepared 200 or more 2003 New Jersey income tax resident returns must use one of the three New Jersey electronic filing methods (NJ WebFile, NJ TeleFile, and NJ ELF) to file their clients’ 2004 New Jersey income tax resident returns.
Estimated Tax on Sale of Real Property by Nonresidents
Nonresident individuals, estates, or trusts that sell or transfer real property in New Jersey after July 31, 2004, may be required to make estimated payments on the gain from a transfer or sale of the property as a condition of the recording of the deed. These payments should be included on either Line 40, Form NJ-1040NR or Line 25, Form NJ-1041.