Governor Murphy Signs New Jersey Budget
July 2, 2018
Late in the evening of July 1, Governor Murphy signed the fiscal year 2019 budget after long negotiations with state legislators.
Because the budget was passed at the eleventh hour, much of it has not been assembled into readable form and experts are still deciphering some of the details, many of them important. Nonetheless, many of the main points are clear in outline form, which are listed below. The NJCPA will report more on the budget’s details, particularly the changes in tax law, as they become available.
Highlights of the budget:
- An increase in the income tax rate to 10.75 percent for taxpayers with income of $5 million and above
- Significant corporate business tax changes, including:
- A surcharge of 2.5 percent for the next two years (tax years beginning on or after Jan. 1, 2018, through Dec. 21, 2019) and 1.5 percent for the subsequent two years (tax years beginning on or after Jan.1, 2020, through Dec. 31, 2021) for corporations with income of $1 million or more
- A new combined reporting system
- A change in the dividends-received deduction for tax years beginning after Dec. 31, 2016. There’s a reduction in the amount of the exclusion from 100 percent to 95 percent for 80-percent-owned subsidiaries.
- Authorization for the New Jersey Division of Taxation to hold a 90-day tax amnesty program that begins this year and ends by Jan. 15, 2019. Eligible returns include those that were due on or after Feb. 1, 2009, and prior to Sept. 1, 2017.
- An increase in the state property tax deduction cap from $10,000 to $15,000
- More funding for the Homestead property tax relief program
- An increase in the Earned Income Tax Credit (EITC)
- A new Child and Dependent Care Tax Credit
- No increase in the sales tax rate, however short-term housing rentals (e.g. Airbnb) will now be subject to sales tax. Plus the state will see more sales-tax revenue thanks to a recent U.S. Supreme Court decision that will allow New Jersey and other states to more aggressively tax online sales.
- A new surcharge on Uber and Lyft rides
- A new tax on e-cigarettes and tobacco
- More funding for NJ Transit
- Modifications to the school funding formula
- Funding for free community college for lower-income residents
As more information becomes available, we will provide updates at njcpa.org/njbudget.