Summer 2022 has proven to be a busy summer for NJ government and the Division of Taxation. With three new major New Jersey tax updates, some taxpayers may soon see temporary relief at the cash register, car dealership, and in their property tax bill.
With inflation severely impacting families’ budgets, tax holidays have been an important topic of conversation this summer. The state of New Jersey is suspending sales tax for 10-days from August 27 – September 5, 2022 on students’ back-to-school items including school and art supplies, certain electronic devices, sports equipment, and more. While a handful of other states host tax holidays for back-to-school savings each year, this is a first for New Jersey.
Retail sales exempt from sales tax during the holiday:
However, businesses take note: This holiday applies to individuals making purchases for non-business use. Technically, if you are a business purchasing supplies during this week, you will need to pay use tax on these retail sales if sales tax was exempt during the transaction. More details and the full list of exempt retail items are available in the Sales Tax Holiday FAQs provided by the state.
NJ residents who want to ditch gasoline and make the switch to an electric vehicle now have further incentive to do so. The state is encouraging the purchase or lease of eligible electric vehicles through an attractive credit of up to $4,000. Note that this is a state credit provided through the dealership, not reflected later on in a tax return.
This program, known as Charge Up New Jersey, “…promotes clean vehicle adoption in the state by offering incentives of up to $4,000 for the purchase or lease of new, eligible zero-emission vehicles, including battery electric and plug-in hybrid electric.” As part of NJ’s push to prioritize eco-conscious programs and help reduce emissions, there are both environmental and financial benefits for those who participate in this incentive program. Interested car buyers can visit chargeup.njcleanenergy.com for fine print, participating dealers, eligible makes and models, and to calculate the value of the credit.
While this is a state credit, the IRS also incentivizes taxpayers to go electric by offering a federal tax credit for the purchase of hybrid and all-electric vehicles. For vehicles acquired after 2010, the credit is equal to $2,500 plus, for a vehicle which draws propulsion energy from a battery with at least 5 kilowatt hours of capacity, $417, plus an additional $417 for each kilowatt hour of battery capacity in excess of 5 kilowatt hours. The total amount of the credit allowed for a vehicle is limited to $7,500. Consult with your CPA for the most current information.
What if you don’t have a garage on your property to easily charge your new electric vehicle? To help eliminate that as a purchase barrier, New Jersey has enacted laws and ordinances that make charging more publicly accessible. For example, the Model Statewide Municipal Electric Vehicle (EV) Ordinance helps municipalities streamline the approval, enforcement, and installation of Electric Vehicle Supply/Service Equipment (EVSE) and Make-Ready parking spaces in all zoning and use districts. In addition, multi-unit dwellings or multi-family developments with more than five units must reserve 15% of parking spaces to be Make-Ready.
Also attractive to developers? A Make-Ready parking space counts as two spaces when calculating compliance with the parking requirements, with up to a maximum 10% reduction. Through the state’s It Pay$ to Plug In program, over $9M in grants and funds have been awarded to applicants to help reimburse the cost of installing chargers. These programs and initiatives contribute to the state’s ambitious goal of 400 DC Fast Chargers in at least 200 locations; 1,000 level 2 chargers; 15% of multi-family residential properties equipped with EVSE; and 20% of Franchised Overnight Lodging Establishments to be equipped with EVSE by 2025.
As a state with one of the highest property taxes in the nation, NJ taxpayers will be relieved to know that a new property tax relief program is replacing the previous Homestead Benefit program. The Affordable New Jersey Communities for Homeowners and Renters (ANCHOR) program is slated to benefit a large number of homeowners, including renters. While this program was announced in March 2022, Governor Murphy’s latest fiscal year budget expands the rebate amount and also the number of households eligible for the relief.
Homeowner benefit amounts will be $1,500 for taxpayers with 2019 gross incomes up to $150,000 or $1,000 for those with 2019 gross income above $150,000, but no higher than $250,000.
Tenants with 2019 gross income up to $150,000 will qualify for a $450 benefit. Applications will be available this fall, and the deadline for submission is December 30, 2022. The benefit will be paid no later than May 2023.
Businesses are excluded from the ANCHOR property tax relief program. Due to the state’s revenue surplus surge, over 2 million households are projected to benefit from nearly $2 billion in ANCHOR funds.
Interest Rate Increase
Effective July 1, 2022, the Division increased the interest rate assessed on unpaid tax balances to 7.75%. Previously, the interest rate was 6.25%. This change resulted from an increase in the prime rate by commercial banks after the Federal Reserve, the nation’s central bank, raised interest rates last month.
Cannabis
As of July 1, 2022, purchases of medical cannabis are now exempt from Sales Tax. After starting to phase out in July 2020, New Jersey has officially reached the final phase where there will no longer be a Sales Tax when purchasing medical cannabis.
Inheritance Tax and Virtual Currency
The Division updated and issued Technical Advisory Memorandum TAM-2015-1(R) to include Inheritance Tax about Convertible Virtual Currency guidance.
For New Jersey Inheritance Tax purposes, convertible virtual currency owned by a decedent is intangible property of the decedent’s estate. The estate is required to determine the fair market value in U.S. dollars of the convertible virtual currency as of the decedent’s date of death. That amount must be reported on the Inheritance Tax return. New Jersey Inheritance Tax follows federal tax guidelines for determining the fair market value of convertible virtual currency as outlined in IRS Notice 2014-21.
For more information on the New Jersey tax updates and how they will affect you and your business, contact an Alloy Silverstein advisor today!
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