While the proposed decrease in New Jersey sales tax and increase in gas tax is garnering all of the headlines, the proposed phase-out of the New Jersey estate tax will have a significant impact on New Jersey residents.
On Friday afternoon, New Jersey Governor Chris Christie announced that he reached a compromise with the Democrat-controlled New Jersey legislature to raise New Jersey’s gasoline tax by 23 cents per gallon, which will result in a 160 percent tax increase, while funding road and bridge work and reducing the sales tax from seven percent to 6.875 percent in 2017 and then to 6.625 percent in 2018. The increased gas tax is expected to become effective next month after the legislature votes on the bill and Governor Christie signs the legislation into law. The estate tax will be phased out during the next year and a half. The legislation also proposes tax credits for veterans and the working poor.
After a New Jersey resident passes away, a tax is imposed if the decedent’s gross estate plus adjusted taxable gifts exceeds $675,000. Many New Jersey residents quickly dismiss the tax as being inapplicable to them. However, the gross value of a decedent’s estate may include all assets that the decedent owned (real estate, bank accounts, stocks, brokerage accounts, IRAs, 401(k) accounts) depending on how those assets are titled. If the value of the decedent’s estate exceeds $675,000, then New Jersey estate tax is owed, unless the beneficiary of the estate is the decedent’s spouse. A surviving spouse does not incur New Jersey estate tax. According to the New Jersey Policy Perspective, approximately 3,000-4,000 estates pay New Jersey estate taxes each year. While it may not seem like a large number, a large number of people whose estate would likely incur estate tax move to a state that does not impose estate tax.