What Does the New Jersey 2021 Fiscal Year Budget Mean for You?

On Tuesday, September 29th, New Jersey Governor Phil Murphy signed a $32.7 billion budget into law, further increasing taxes on millionaires and businesses.

Specifically, the budget increases the tax rate on individual annual income between $1 million and $5 million from 8.97% to 10.75%. The Murphy administration has reported that 16,491 New Jersey residents and 19,128 nonresidents will pay the higher tax rate. Currently, the 10.75% rate applies only to those individuals with incomes higher than $5 million, with 7,706 filers already paying the higher tax rate.

The legislation also provides for a tax rebate of up to $500 for married couples with income under $150,000 and single filers with income under $75,000. The rebate will be disbursed between July 1st and December 31, 2021. To qualify, taxpayers must have at least one dependent child and a gross income tax liability greater than zero.

In addition, the budget restores and extends the 2.5% corporate business surtax on certain taxpayers with profits of more than $1 million until December 31, 2023. The surtax, which took effect in 2018, dropped to 1.5% this past January 1st and was slated to expire December 31, 2021. The measure will apply retroactively to periods on or after January 1, 2020.

These changes to the New Jersey tax regime are far reaching and impact both tax planning and residency considerations.

If you have any questions about how these changes may impact your overall tax planning, or about other State and Local Tax (SALT) changes, please contact Anchin’s SALT group leader, Alan Goldenberg, or your Anchin relationship partner.