Jersey Increases Taxes and Fees
Mark H. Levin
end of June, the New Jersey Legislature passed, and Governor
James E. McGreevey signed into law, several bills to fund
the governor’s 2004/05 budget. These acts increase various
taxes and fees.
most publicized of these tax acts increases the New Jersey
gross income tax to 8.97% for taxpayers with taxable income
of $500,000 or greater, effective retroactively to January
1, 2004. The old 6.37% rate will continue to apply to taxable
income up to $499,999. This new $500,000 bracket applies
to all taxpayers regardless of filing status.
with this new tax rate, New Jersey has issued two new withholding
tables to reflect the new 8.97% rate. The first table takes
effect on September 1, 2004, continuing through December
31, 2004, and incorporates a top rate of 12% to catch up
for the period prior to September 1, 2004, when the top
withholding rate reflected the old rate. The second withholding
table takes effect January 1, 2005, and has a top rate of
feature of the budget package is the withholding on the
sale of New Jersey real property by nonresidents. Effective
August 1, 2004, estimated tax payments will be required
(with certain exceptions) on the sale of New Jersey real
estate by nonresident individuals, estates, or trusts. The
estimated tax will be based on the gain on the sale and
will be at the highest personal income tax rate (8.97%).
following sales will be exempt from this withholding:
The sale of a personal residence as defined in IRC section
Where the seller is a mortgagor conveying property in
a foreclosure or in a deed in lieu of foreclosure;
Where the transferor or transferee is—
An agency or authority of the United States,
An agency or authority of New Jersey State,
The Federal National Mortgage Association (Fannie Mae),
The Federal Home Loan Mortgage Corporation,
The Government National Mortgage Association (Ginnie Mae),
A private mortgage insurance company.
addition to the basic fee on the sale of real property of
$1.75 per $500 of consideration, effective for transfers
of real property on or after August 1, 2004, the legislation
imposes a general fee on all transfers of real property
where the consideration is in excess of $350,000, at the
following rates (in terms of each additional $500 of consideration
or fraction thereof):
$350,000–$550,000 $0.90 per $500
$550,000–$850,000 $1.40 per $500
$850,000–$1 million $1.90 per $500
Over $1 million $2.15 per $500
for transfers of real property on or after August 1, 2004,
the legislation imposes upon the buyer of real property
zoned residential, whether improved or not, where the consideration
is in excess of $1 million, an additional separate fee equal
to 1% of the full amount of the consideration.
for assets placed in service on or after January 1, 2004,
in taxable years beginning on or after January 1, 2004,
New Jersey will no longer allow any 30% or 50% “bonus”
with the decoupling of bonus depreciation, New Jersey will
no longer allow a depreciation deduction based on the bonus
depreciation under IRC section 280F.
for property placed in service on or after January 1, 2004,
the maximum amount allowed to be deducted under IRC section
179 is limited to the maximum amount allowed under IRC section
179 as it existed on December 31, 2002, $25,000.
for taxable years 2004 and 2005, a corporation may use net
operating losses (NOL) up to 50% of the corporation’s
entire net income. (For tax years 2002 and 2003 the NOL
deduction was suspended.) Any NOL that is disallowed because
of suspension will have its life extended.
August 1, 2004, a fee of $1.50 per tire will be imposed
on the sale of all tires that are subject to the New Jersey
sales tax, including new tires that are a component of a
purchased or leased motor vehicle.
Effective July 1, 2004, the cigarette tax was increased
to $2.40 per pack, up from $2.05 per pack.
September 1, 2004, a 6% tax will be charged on certain cosmetic
medical procedures that are not reconstructive in nature,
including, but not limited to, cosmetic surgery, hair transplants,
cosmetic injections, cosmetic soft tissue fillers, dermabrasion
and chemical peel, laser hair removal, laser skin resurfacing,
laser treatment of leg veins, and cosmetic dentistry.
July 1, 2004, a gross receipts tax of 3.5% was imposed on
certain ambulatory health-care facilities with gross receipts
of at least $300,000, due in four installments. The tax
is capped at $200,000. The tax rate for 2006 will be recalculated
so as to produce the same amount of revenue as was collected
in 2005, except that the $200,000 cap remains unchanged.
The 2006 tax rate will remain in effect for 2007 and thereafter.
June 29, 2004, a special interim assessment of 1% on new
written premiums was imposed on HMOs authorized to operate
in New Jersey. The interim assessment is effective July
1, 2004, through June 30, 2005 (fiscal year 2005).
current 6% fee charged on the gross receipts from the retail
sale of billboard advertising space is extended through
June 30, 2006, after which it will be reduced to 4% for
the period July 1, 2006, through June 30, 2007, and will
be eliminated effective July 1, 2007.
the major aim of the 2004/05 budget package was to raise
revenue, it also included an increase in the rebates based
on the real estate taxes paid on a taxpayer’s residence.
the legislation, the current NJ SAVER rebate program is
folded into the homestead property tax rebate program. Under
the new combined homestead property tax rebate program,
the maximum property tax rebate will increase to $800, from
$250. For elderly, disabled, and low-income taxpayers, the
maximum property tax rebate will increase to $1,200, from
$775; however, a taxpayer whose gross income exceeds $200,000
will not be entitled to a rebate.
H. Levin, CPA, is manager, state and local taxes,
at H.J. Behrman & Company, LLP.