The Repeal of the New Jersey Estate Tax: Is it Now Safe to Move Back to New Jersey?
On October 14, 2016, Governor Christie signed into law a transportation funding bill that also included the repeal of the New Jersey Estate Tax. Here is what you need to know:
- The New Jersey Estate Tax repeal will be effective as of January 1, 2018. The current $675,000 exemption will increase to a $2 million exemption on January 1, 2017. The Estate Tax will be eliminated as of January 1, 2018.
- The New Jersey Inheritance Tax is still in effect. This is a tax imposed on transfers to beneficiaries who are not spouses, parents, children or grandchildren (i.e., nieces, nephews, siblings, friends, etc.) New Jersey Inheritance Tax rates start at 11% and go as high as 16%.
- As part of the new law, there is a tax break for retirees. There will be an increase in the New Jersey gross income tax exclusion on pension or retirement income over four years (in 2020) to $100,000 for couples, $75,000 for individuals, and $50,000 for married taxpayers who file separately.
- On January 1, 2017, the sales tax will be reduced from 7% to 6.875% and will be further reduced to 6.625% on January 1, 2018.
Now that the repeal has been enacted, is New Jersey an attractive state to die in? We have counseled many clients over the years that moving to Florida could save significant estate taxes. With the New Jersey Estate Tax repeal (effective in 2018), some of the advantages enjoyed by Floridians can now also be enjoyed by New Jersey taxpayers (namely, no estate tax in either state).
However, moving to Florida also saves income tax, as Florida does not impose state income tax. New Jersey still does, so this remains a major advantage when moving to Florida. All income from sources outside New Jersey will not be taxed in New Jersey if you reside in Florida. If you reside in New Jersey, you will still pay state income tax on all income.
Also, if you bequeath assets to beneficiaries who are not descendants and you reside in New Jersey, you still will trigger a New Jersey Inheritance Tax, as this tax was not repealed.
Despite the New Jersey Estate Tax repeal, it is still very important to make sure your estate is in order if you reside in New Jersey. There are significant federal estate tax issues to plan for, and many non-tax issues which need to be considered and properly addressed.
As the law continues to evolve on these matters, please note that this article is current as of date and time of publication and may not reflect subsequent developments. The content and interpretation of the issues addressed herein is subject to change. Cole Schotz P.C. disclaims any and all liability with respect to actions taken or not taken based on any or all of the contents of this publication to the fullest extent permitted by law. This is for general informational purposes and does not constitute legal advice or create an attorney-client relationship. Do not act or refrain from acting upon the information contained in this publication without obtaining legal, financial and tax advice. For further information, please do not hesitate to reach out to your firm contact or to any of the attorneys listed in this publication.