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New Year Brings NJ Tax Changes

New Jersey Statehouse dome
Phil Gregory

The legislation that raised New Jersey’s gas tax 23 cents in November also includes some tax cuts that take effect at the start of the new year.

The amount of retirement income excluded from New Jersey’s income tax doubles to $40,000 in 2017 and increases to $100,000 by 2020.
 
Bernard Kiely, a certified financial planner and certified public accountant in Morristown, says that will make a difference for many people.
 
“For most people who are retired they’re living on Social Security, which New Jersey does not tax, and they’re living on either pensions or IRA distributions. So, a whole lot of retirees will no longer pay New Jersey income tax.”
 
The exemption from the state’s estate tax increases to $2 million and will be completely eliminated in 2018.
 
The 7 percent state sales tax rate decreases to 6.875 percent.
 
Keily says most people probably won’t notice that, but he believes the phase out of the estate tax and the retirement income exclusion change are a big deal.
 
“It means people will no longer have an incentive to leave the state of New Jersey when they retire.”
 
Eleanore Szymanski, a certified financial planner in Princeton, does not believe the estate tax phase out will be the deciding factor on whether people leave the state.
 
“We still have one of the highest real estate taxes and we do have the income tax. So, I think people are wary of New Jersey anyway.”
 
Szymanski says the change in the estate tax does mean that some of her clients won’t have to do as much estate planning.
 
“Heretofore we’ve had to protect married couples with a credit sheltered trust embedded in their wills or outside of their wills. To create one of those is a couple thousand bucks so that’s a big savings for them if they don’t have to do that.”
 
The legislation also gives an income tax break to veterans and increases a tax credit for low income workers.