New Jersey 2009 Income Tax Rate Increase....

The state of New Jersey is another state enacting increase in their gross income tax rate for the year of 2009, reducing and limiting their already limited income tax deductions as well as eliminating the state of New Jersey property tax rebates among other provisions. These provisions are efforts taken by Gov. Jon Corzine, who signed the state budget on June 29, 2009 to close the state of New Jersey's budget gap.

· Personal income tax rate increase: The personal income tax rate has been increased from for all New Jersey taxpayers with taxable income in excess of $400,000.
The rates are as follow:
1) 8% for taxable income above $400,000 but not over $500,000;
2) 10.25% for taxable income above $500,000 but not over $1 million;
3) 10.75% for all tax filers who earn more than $1 million.

The temporary New Jersey income tax rate increase is in effect for tax years beginning after 2008 and before 2010. The current maximum tax rate is 8.97% for taxable income above $500,000 which is a 20% income tax rate increase.

No additional taxes or penalties will be imposed by the state of New Jersey for deficiencies on estimates tax payments due on salaries, wages received before October 1, 2009, at which point the new tax rates would take effect. Employers will not be subject to interest, penalties, or other costs that would otherwise be imposed as a result of the insufficient withholding according to the new tax rates.

· Property Tax Deduction limitations: The state of New Jersey provides for limited deductions on the tax individual tax returns including a property tax deduction of up to $10,000 for property tax paid. Starting Higher-income taxpayers will see their deductions limited to a maximum of $5,000 for taxpayers with gross income in excess of $150,000, but not over $250,000. For taxpayers with gross income in excess of $250,000, no property tax deduction will be allowed unless the taxpayer is 65 years old or older, blind or disabled.

· Property Tax Rebates: As if limiting the Property Tax Deduction was not sufficient, the legislation eliminates property tax rebates for non-senior non-disabled homeowners with income over $75,000. Senior and disabled homeowners with income up to $150,000 will still qualify. Homeowners with earnings up to $50,000 will receive last year's Property Tax Rebate, whereas homeowners with earnings above $50,000 but not over $75,000 will receive two thirds of last year's property tax rebate.

The measure eliminates non-senior tenants from the homestead rebate program for 2010 fiscal year, but maintains the Senior and Disabled Citizens Property Tax Freeze Program.

· Lottery Winnings Taxation: Currently, winnings from the New Jersey Lottery are exempt from New Jersey income taxes. Beginning tax years after 2008, New Jersey Lottery winnings in excess of $10,000 will be included in gross income and withholding will be required.

Below is the State of New Jersey Department of Taxation public notice regarding the income tax legislation changes and its impact.
http://www.state.nj.us/treasury/taxation/pdf/webnoticetaxrateincrease.pdf