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New Jersey Estate Tax, Important Technical Provisions
P.L. 2016, c. 57 signed into law on October 14, 2016, provides that the New Jersey Estate Tax exemption increased from $675,000 to $2 million for the estates of resident decedents who die on or after January 1, 2017, but before January 1, 2018. (There is no Estate Tax assessed against nonresident decedent's estates.)
For the estates of resident decedents who die on or after January 1, 2018, the New Jersey Estate Tax will not be imposed.
In addition to the Estate Tax, New Jersey imposes an Inheritance Tax on the estates of certain resident and nonresident decedents. P.L. 2016, c. 57 made no changes to the New Jersey Inheritance Tax.
For the estates of resident decedents who die on or after January 1, 2017, but before January 1, 2018
For the estates of resident decedents who die on or after January 1, 2017, but before January 1, 2018, the New Jersey Estate Tax no longer conforms to the provisions of the federal Internal Revenue Code in effect on December 31, 2001 and instead follows the federal Internal Revenue Code in effect on January 1, 2017 for determining the value of the estate which will be subject to New Jersey Estate Tax.
A New Jersey Estate Tax Return must be filed if the decedent's gross estate, as determined in accordance with the provisions of the Internal Revenue Code, exceeds $2 million. The return must be filed within nine (9) months from the decedent's date of death.
The New Jersey Estate Tax is determined pursuant to section 2051 of the federal Internal Revenue Code (26 U.S.C. s.2051).
A completed current federal Form 706 (Rev. August 2013 version) must be submitted along with the New Jersey Estate Tax Return whether or not the estate is subject to federal estate tax.
The starting point for the New Jersey Estate Tax is the federal gross estate, which is reported on line 1 of the federal Form 706. This amount is to be reported on line 1 of the 2017 New Jersey Estate Tax Return. Allowable deductions reported on line 2 of the federal Form 706 are then reported on line 2 of the 2017 New Jersey Estate Tax Return.
The New Jersey taxable estate is calculated by subtracting the allowable deductions from the gross estate.
Total allowable New Jersey credits are deducted from the New Jersey tentative tax to arrive at the Net New Jersey Estate Tax. There are three possible New Jersey Estate Tax credits.
Credit for the tax on $2 million exclusion ($99,600). This represents the amount of tax that would have been due on a $2 million estate, but is excluded for 2017. The Estate Tax Online Calculator deducts this credit automatically.
Credit for New Jersey Inheritance Tax paid. This is the tax amount, if any, imposed by the New Jersey Inheritance Tax. (Do not include interest or penalty.)
Credit for the portion of tax attributable to real and tangible property located outside of New Jersey, line 4 of Schedule E-3.
The New Jersey Estate Tax is reduced by the portion of the tax that is attributable to real and tangible property located outside New Jersey. The amount of the reduction is calculated by multiplying the tax due on the entire gross estate wherever located by a fraction. The numerator of the fraction is the gross value of property located outside of the state, and the denominator is the New Jersey entire gross estate wherever located. In general, for purposes of the calculation, intangible personal property is considered to be located in New Jersey regardless of where it may actually be located.
Gross Value of Property Located Outside New Jersey
x Tax Due on Entire Gross Estate Wherever Located = Allowable Reduction