Posted October 2, 2007

Last week, we brought you the story of New Jersey’s Homestead Rebate checks – the grand announcement of great property tax relief by our state’s leaders and the less-than-grand reality that the relief proved to be for New Jersey homeowners.

This week, we focus on another property tax injustice affecting the working families of our state: the New Jersey Property Tax Deduction/Credit. On the books for several years and billed as one of the state’s property tax relief programs, the Property Tax Deduction/Credit program works as follows:

(Cited from the State of New Jersey Division of Taxation’s website)

Eligible homeowners and tenants who pay property taxes, either directly or through rent, on their principal residence in New Jersey are eligible for either a deduction or a refundable credit on their New Jersey resident income tax return. Homeowners and tenants may be eligible for a deduction or credit even if they are not eligible for a homestead rebate. Qualified residents may deduct 100% of their property taxes due and paid or $10,000, whichever is less .

In other words, when filing state tax returns, homeowners may deduct up to $10,000 of their property taxes.

Sounds like a great plan, right?

Before standing to your feet to give an ovation, however, consider this: New Jersey’s property tax rates remain the highest in the nation. According to the non-partisan Tax Foundation, state and local property tax collection per capita in New Jersey stands at $2,206, the highest in the nation. When calculated per owner-occupied housing, the median number jumps to $5,773, also the highest nationwide.

And the numbers are not decreasing.

In just the past several months, the media has reported of town tax revaluations resulting in significant property tax hikes. In the past several weeks alone, news reports have covered hikes in at least Haddon Heights (Camden County), Englewood (Bergen County), and Paterson (Passaic County). And in many cases, hardworking middle-class homeowners have been hit the hardest.

Despite tax bill increases, however, the cap for state deductibility remains at $10,000. This means that for the family that once paid $7,000 in property taxes and now owes $15,000, only $10,000 of this amount is deductible. And while property taxes have risen in many towns over the past several years, the $10,000 cap has remained stagnant, meaning that more and more people are now being hit by the “non-deductibility” factor in the so-called “deduction” relief.

The state of New Jersey should not penalize its citizens for the simple yet significant achievement of homeownership. With soaring property tax rates coupled with the newly-raised sales tax, New Jersey’s legislators should be looking for every opportunity to provide relief – real relief – to beleaguered taxpayers.

The federal government allows for 100% deduction of state property taxes on federal returns. Why should the deduction allowance for state returns be any different? We urge New Jersey to show its support for the middle-class taxpayer and abolish the harmful cap on state property tax deductibility.

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