Transcript DIFFERENCES BETWEEN FEDERAL AND NEW JERSEY TAX LAW

DIFFERENCES
BETWEEN
FEDERAL AND NEW JERSEY TAX LAW
DIFFERENCES BETWEEN FEDERAL
AND NEW JERSEY TAX LAW
DIFFERENCES BETWEEN FEDERAL
AND NEW JERSEY TAX LAW
 General
 Losses are not permitted anywhere on the
New Jersey tax return; leave line blank
 Itemized Medical Expense in excess of 2% of
NJ Gross Income reduce taxable income.
 NJ allows either a Property Tax Deduction or
a Property Tax Credit
 NJ allows a credit for Income Taxes paid to
other jurisdictions.
 No deduction for Sales Tax
Exemptions - Line 6
 Taxpayer always gets a deduction for self on
New Jersey return
May be disallowed on Federal return
 Civil Union Partner Exemption allowed on
New Jersey return
Not allowed on Federal return
 Domestic Partner Exemption allowed on New
Jersey return
Not allowed on Federal return
Exemptions - Line 7
 Additional Exemptions for age
on New Jersey return
 Addition(s) to Standard Deduction for age
on Federal return
 Civil Union Partner allowed on New Jersey return
Not allowed on Federal Return
Exemptions - Line 8
 Additional Exemptions on New Jersey return
if Blind or Disabled
 Addition(s) to Standard Deduction on Federal
return for blind
No addition(s) to Standard Deduction on
Federal return for disability
 Civil Union Partner allowed on New Jersey return
Not allowed on Federal return
Exemptions - Line 11
 Additional Exemption(s) on New Jersey
return
TaxWise: Must be entered
 Adjustment to income or tax credit on
Federal return
Income not taxable on New Jersey return
  Federal Social Security
and Tier 1 Railroad Retirement Benefits
May be partially taxable on Federal return
  Tier 2 Railroad Retirement Benefits
May be fully or partially taxable on
Federal return
Income not taxable on New Jersey return
  United States military pensions
reported on Form 1099-R by the US Defense
and Accounting Service
Fully taxable on Federal return
  Qualifying scholarships or fellowship
grants
May be fully or partially taxable on
Federal return
  Unemployment Compensation
Fully taxable on Federal return
Income not taxable on New Jersey return
  New Jersey Lottery winnings
Fully taxable on Federal return
[Maybe offset with a Schedule A entry for
gambling losses]
  Interest and capital gains from direct
Federal obligations exempt under law
Fully taxable on Federal return
Income not taxable on New Jersey return
  Distributions paid by mutual funds
attributable to interest earned on Federal
obligations
Fully taxable on Federal return
  Certain distributions from New Jersey
Qualified Investment Funds
Fully taxable on Federal return
Income not taxable on New Jersey return
  Homestead rebates and
Property Tax Reimbursements
May be taxable or reduce Schedule A
deduction on Federal return
Line 14 - Wages:
Box 16 (State Wages) from the W-2(s) must be
used on Form NJ-1040, Line 14. This box is often
different than Box 1 (Wages)
Line 15 a – Taxable Interest Income
 Taxable categories differ from Federal rules
See New Jersey Instructions and
Chapter 7 Publication 17.
 TaxWise: Make these adjustments on the
Interest Statement worksheet and/or the
Dividend Statement worksheet.
Line 15b – Tax Exempt Interest
 Exempt Categories differ from Federal
rules See New Jersey Pub GIT-5.
 TaxWise: Make these adjustments on the
Interest Statement worksheet and/or the
Dividend Statement worksheet.
Line 18 – Net gains from disposition
of property:
Exclude gains and losses from NJ Exempt securities
as defined in GIT-5.
 TaxWise: Make adjustments with a scratch pad to
NJ Schedule B line 1. [See NJ EFC Handbook,
pages 16 & 17.]
Line 19 – Pensions, Annuities
and IRA Withdrawals
 Exclude:
 Federal Social Security
 Railroad Retirement (Tier 1 and Tier 2)
TaxWise: Check Railroad Retirement box on the 1099-R screen.
 United States military pensions
[See TAX TIP for Line 19]
TaxWise: Check box 2 of the 1099-R screen.
Line 19 – Pensions, Annuities
and IRA Withdrawals
 General Rule or 3 Year Rule (if applicable)
allowed for NJ calculation.
TaxWise: If 3 Year Rule is/was used, adjustment to
lines 19 will be required.
[See NJ EFC Handbook, page 16.]
 Federal tax exempt distributions from an
IRA for charitable gifts are NJ taxable.
 TaxWise: Must complete NJ IRA Withdrawal
Worksheet for every IRA withdrawal
Line 23 – Net Gambling Winnings:
 Net gambling winnings (excluding New Jersey
Lottery winnings and losses) are reported.
TaxWise: Fill in gambling losses on the W-2G
screen even if Schedule A will not be used. If the
winnings are from the NJ lottery, check the state
return box on the W-2G screen. NJ Lottery losses
are only entered on a W-2G reporting NJ Lottery
winnings.
Line 27a – Pension Exclusion
Line 27 b – Other Retirement Income
Line 27 c – Total exclusion
 Allowed within age and income restrictions.
 Unused Pension Exclusion amount may be carried
over to Line 27 b - Other Retirement Income
Exclusion. Paper returns use Worksheet D
TaxWise: Automatic Calculation
Line 28 – Gross Income
 If gross income is less than $20,000 ($10,000 Single
or Married-Sep), no NJ Tax return is required.
Return should be filed if a refund is due. TaxWise:
If federal return is being e-filed and no NJ return is
required for any reason, then check paper return on
page 3 of the NJ 1040. When it prints, write “DO
NOT FILE” on it. However, if a tenant rebate is
requested, e-file the NJ return, even if it is not
needed for any other reason.
Line 30 – Medical Expenses
 Out-of-pocket expenses exceeding 2% of NJ Gross
Income (line 28). If doing manually, complete
Worksheet E.
TaxWise: enter medical expenses on the Schedule A
detail worksheet, even if Schedule A will not be filed.
 Pre-tax Federal/After-tax NJ medical deductions
(Flex Savings Accounts, for example) should be
included as NJ medical expenses.
TaxWise: enter these using a scratch pad to line 30.
(See NJ EFC Handbook, page 17.)
Line 36a - Property Tax Paid
 Property Tax Due and Paid on taxpayers
qualified principal residence. May be equal
to, less than or greater than the amount
deducted on Schedule A, Form 1040.
 Use the amount shown for Real Estate Tax
from Form 1098, sum of actual payments
and/or 18% of principal residence rent paid.
TaxWise: Amount must be entered on page 3,
Schedule 1, Line 1 Property taxes you paid … .
Line 36b – Home Owner?
 Line 36b should not be completed
if Taxpayer
is a tenant
or
is not a homeowner
on October 1 of Tax Year
Line 36c - Property Tax Deduction
or Line 48 Property Tax Credit
 Use Schedule 1 to determine the greater benefit.
Only one of these lines can be used. Property taxes
and/or 18% of rent paid on principal residence
only.
 Taxpayers eligible for Property Tax Reimbursement
must use base year property tax as Property Tax Paid
TaxWise: enter property tax and/or rent on
Schedule 1 on page 3 of the return. Do not
make entry on 36c or 48.
Line 50 - NJEITC:
 An individual who is eligible for a federal
earned income tax credit will be allowed a
NJEITC credit equal to a percentage of the
federal earned income tax credit allowed.
 The percentage of the federal earned income
tax credit allowed for Tax Year 2008 will be
22.5%
TaxWise: Automatic Calculation
Lines 51 & 52 - Excess UI/DI:
 If two or more employers, complete Form 2450
to determine if excess UI/DI was withheld.
UI/DI information is usually found in Box 14 of
the W-2 Statement.
TaxWise: UI/DI always entered in Box 14.
Confirm entries on the W-2 screen read
“NJSDI” and “NJSUI”.
If needed, Form 2450 will calculate
automatically.
DIFFERENCES BETWEEN
FEDERAL AND NEW JERSEY TAX LAW