New Jersey has recently enacted legislation that increases the maximum gross income tax rate and makes other changes to personal income tax, effective as stated below
Tax rate increase. For the 2018 tax year and thereafter, the law increases the highest rate to 10.75%. This rate will apply on taxable income in excess of $5 million, regardless of the filing status of the taxpayer. For taxable year 2018, withholding by every employer from salaries, wages and other remuneration paid by an employer for services rendered in excess of $5 million during 2018, should be at the rate of 15.6% as soon as practicable but no later than September 1, 2018.
Property tax deduction. For tax years beginning after 2017, the maximum property tax deduction for a resident taxpayer is increased from $10,000 to $15,000.
Earned income tax credit. The earned income percentage is increased from 35% of the federal tax credit to 37% of the federal tax credit in 2018, 39% of the federal tax credit in 2019 and 40% of the federal tax credit for 2020 and thereafter.
Child and dependent care credit. For tax years beginning after 2017, a taxpayer who is allowed a federal child and dependent care credit will be permitted to claim a state tax credit that will be a percentage applied to employment related expenses up to $500 if the taxpayer has one qualifying individual or employment related expenses of up to $1,000 if the taxpayer has more than one qualifying individual. The percentage applied will be 50% of those expenses if the individual has New Jersey taxable income of less than $20,000; 40% of those expenses if New Jersey taxable income is $30,000 or less; 30% of those expenses if New Jersey taxable income is $40,000 or less; 20% of those expenses if New Jersey taxable income is $50,000 or less and 10% of those expenses if New Jersey taxable income is $60,000 or less. No credit is allowed if New Jersey taxable income is greater than $60,000.
Carried interest provisions. An additional surtax of 17 percent will apply on income from investment management services received during the taxpayer’s taxable year. However, this provision will not be operative until similar legislation is approved by Connecticut, Massachusetts and New York.
