NJ Gas Tax Passes and Paves the Way for Phase-Out of the Estate Tax
This bill which had been in the proposal stage for many months has created a political backlash throughout the State of New Jersey. This multi-part bill will increase New Jersey’s gas tax, for the first time since 1988, by 23 cents to 37.5 cents a gallon. The tax increase will go into effect no sooner than November 1 or 15 days after it is signed by Governor Christie, yielding an additional $1.16 billion a year in dedicated revenue for transportation projects.
In addition to the increase in the gas tax, this bill will cut $1.4 billion in estate, sales and income taxes as follows:
- The estate tax for decedents will be phased out over two years. The $675,000 estate tax threshold will increase to $2 million on January 1, 2017 and eliminated altogether after January 1, 2018. The New Jersey Inheritance tax will remain unchanged as such; estates where bequests go to non-lineal descendants (bequests to individuals other than children, grandchildren, and spouse) will still be subject to New Jersey Inheritance tax.
- Sales taxes will decrease from 7 percent to 6.875 percent on January 1, 2017 and then from 6.875 percent to 6.625 percent on January 1, 2018.
- The Earned Income Tax Credit will increase from 30 percent of the Federal Earned Income Tax Credit to 35 percent for low-income workers beginning in tax year 2016.
- The exclusion for pension and retirement income will be phased in over four years by January 1, 2020 and increase to $100,000 for married filing joint filers, $75,000 for individuals and $50,000 for married couples filing separately.
- A new $3,000 income tax exemption for veterans who were honorable discharges from active service in the military or National Guard.
Many residents have contemplated changing their domicile and moving out of New Jersey due to the onerous estate tax laws currently in place. The phase-out of the estate tax should help stem this flight. High-net-worth individuals should review their estate planning documents in light of the repeal of the New Jersey estate tax. Estate documents may need changes to ensure proper funding of credit shelter and marital trusts at the death of the first spouse, titling of assets and life insurance needs may change in light of the repeal of the New Jersey estate tax.
Please contact your local Withum tax advisor to discuss how the change in the New Jersey tax law impacts your individual situation.
|Jodi Kleuskens, CPA, MAcc
T (970) 925 7382
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