What are the changes to the NJ
Estate Tax?
NJ Estate Tax eliminated on
Estates under $2,000,000 as of January 1, 2017
The new law phases out the estate tax
over two years, by first replacing the old $675,000 threshold with a “true”
exclusion amount established at $2.0 million for decedents dying on or after
January 1, 2017, and then eliminating the estate tax for decedents dying on and
after January 1, 2018.
P.L.
2016, c. 57 provides that the New Jersey Estate Tax exemption increased from $675,000 to $2 million for the
estates of resident decedents dying on or after January 1, 2017, but before
January 1, 2018. For these estates, the New Jersey Estate Tax no longer
conforms to the provisions of the federal Internal Revenue Code of 1986 in
effect on December 31, 2001 and instead follows the current federal Internal
Revenue Code for determining the value of the estate, which will be subject to
New Jersey Estate Tax.
Married couples filing
jointly will, over the course of 4 years, exclude the first $100,000 in
retirement from their income from their taxes,, up from the current amount of
$20,000.
There will be a $3,000
deduction for veterans of the armed forces.
Below is the new statute:
NJSA 54:38-1 is amended to read as follows:
54:38-1. a.
In addition to the inheritance, succession or legacy taxes imposed by this
State under authority of chapters 33 to 36 of this title (R.S.54:33-1 et seq.),
or hereafter imposed under authority of any subsequent enactment, there is
hereby imposed an estate or transfer tax:
(1)
Upon the transfer of the estate of every resident decedent dying before January
1, 2002 which is subject to an estate tax payable to the United States under
the provisions of the federal revenue act of one thousand nine hundred and
twenty-six and the amendments thereof and supplements thereto or any other
federal revenue act in effect as of the date of death of the decedent, the
amount of which tax shall be the sum by which the maximum credit allowable
against any federal estate tax payable to the United States under any federal
revenue act on account of taxes paid to any state or territory of the United
States or the District of Columbia, shall exceed the aggregate amount of all
estate, inheritance, succession or legacy taxes actually paid to any state or
territory of the United States or the District of Columbia, including
inheritance, succession or legacy taxes actually paid this State, in respect to
any property owned by such decedent or subject to such taxes as a part of or in
connection with the estate; and
(2)
(a) Upon the transfer of the estate of every resident decedent
dying after December 31, 2001, but 2[after December 31, 2016,] before January 1, 2017,2 which would have been subject to an
estate tax payable to the United States under the provisions of the federal
Internal Revenue Code of 1986 (26 U.S.C. s.1 et seq.) in effect on December 31,
2001, the amount of which tax shall be, at the election of the person or
corporation liable for the payment of the tax under this chapter, either
(i) the maximum credit that would have been allowable under
the provisions of that federal Internal Revenue Code in effect on that date
against the federal estate tax that would have been payable under the
provisions of that federal Internal Revenue Code in effect on that date on
account of taxes paid to any state or territory of the United States or the
District of Columbia, or
(ii)
determined pursuant to the simplified tax system as may be prescribed by the
Director of the Division of Taxation in the Department of the Treasury to
produce a liability similar to the liability determined pursuant to clause (i)
of this paragraph reduced pursuant to paragraph (b) of this subsection.
(b) The
amount of tax liability determined pursuant to subparagraph (a) of this
paragraph shall be reduced by the aggregate amount of all estate, inheritance,
succession or legacy taxes actually paid to any state or territory of the United
States or the District of Columbia, including inheritance, succession or legacy
taxes actually paid this State, in respect to any property owned by such
decedent or subject to such taxes as a part of or in connection with the
estate; provided however, that the amount of the reduction shall not exceed the
proportion of the tax otherwise due under this subsection that the amount of
the estates's property subject to tax by other jurisdictions bears to the
entire estate taxable under this chapter.
(3)
(a) Upon the transfer of the estate of each resident decedent dying
on or after January 1, 2017, 2[but before January 1, 2020,]2 whether or not subject to an estate tax payable to the United States
under the provisions of the federal Internal Revenue Code (26 U.S.C. s.1 et
seq.), the amount of the taxable estate, determined pursuant to section 2051 of
the federal Internal Revenue Code (26 U.S.C. s.2051), shall be subject to tax
pursuant to the following schedule:
|
On any amount up to
$100,000 . . . . . .
|
0.0%
|
|
On any amount in
excess of $100,000, up to $150,000 . . . . . . . . . . . . . . .
|
0.8% 2of the excess over $100,0002
|
|
On any amount in
excess of $150,000, up to $200,000. . . . . . . . . . . . . . . .
|
$400 plus 1.6% of the
excess over $150,000
|
|
On any amount in
excess of $200,000, up to $300,000. . . . . . . . . . . . . . . .
|
$1,200 plus 2.4% of
the excess over $200,000
|
|
On any amount in
excess of $300,000, up to $500,000. . . . . . . . . . . . . . . .
|
$3,600 plus 3.2% of
the excess over $300,000
|
|
On any amount in
excess of $500,000, up to $700,000. . . . . . . . . . . . . . . .
|
$10,000 plus 4.0% of
the excess over $500,000
|
|
On any amount in
excess of $700,000, up to $900,000. . . . . . . . . . . . . . . .
|
$18,000 plus 4.8% of
the excess over $700,000
|
|
On any amount in
excess of $900,000, up to $1,100,000. . . . . . . . . . . . . . .
|
$27,600 plus 5.6% of
the excess over $900,000
|
|
On any amount in
excess of $1,100,000, up to $1,600,000. . . . .
|
$38,800 plus 6.4% of
the excess over $1,100,000
|
|
On any amount in
excess of $1,600,000, up to $2,100,000. . . . .
|
$70,800 plus 7.2% of
the excess over $1,600,000
|
|
On any amount in
excess of $2,100,000, up to $2,600,000. . . . .
|
$106,800 plus 8.0% of
the excess over $2,100,000
|
|
On any amount in
excess of $2,600,000, up to $3,100,000. . . . .
|
$146,800 plus 8.8% of
the excess over $2,600,000
|
|
On any amount in
excess of $3,100,000, up to $3,600,000. . . . .
|
$190,800 plus 9.6% of
the excess over $3,100,000
|
|
On any amount in
excess of $3,600,000, up to $4,100,000. . . . .
|
$238,800 plus 10.4%
of the excess over $3,600,000
|
|
On any amount in
excess of $4,100,000, up to $5,100,000. . . . .
|
$290,800 plus 11.2%
of the excess over $4,100,000
|
|
On any amount in
excess of $5,100,000, up to $6,100,000 . . . .
|
$402,800 plus 12.0%
of the excess over $5,100,000
|
|
On any amount in
excess of $6,100,000, up to $7,100,000 . . . . .
|
$522,800 plus 12.8%
of the excess over $6,100,000
|
|
On any amount in
excess of $7,100,000, up to $8,100,000 . . . . .
|
$650,800 plus 13.6%
of the excess over $7,100,000
|
|
On any amount in
excess of $8,100,000, up to $9,100,000 . . . . .
|
$786,800 plus 14.4%
of the excess over $8,100,000
|
|
On any amount in
excess of $9,100,000, up to $10,100,000 . . . .
|
$930,800 plus 15.2%
of the excess over $9,100,000
|
|
On any amount in
excess of $10,100,000. . . . . . . . . . . . . . . . . . .
|
$1,082,800 plus 16.0%
of the excess over $10,100,000
|
(b)
A credit shall be allowed against the tax imposed pursuant to subparagraph (a)
of this paragraph equal to the amount of tax which would be determined by
subparagraph (a) of this paragraph if the amount of the taxable estate were
equal to the exclusion amount.
For the
transfer of the estate of each resident decedent dying on or after January 1,
2017, but before January 1, 2018, the exclusion amount is 2[$1,000,000] $2,000,0002.
2[For the transfer of the estate of each
resident decedent dying on or after January 1, 2018, but before January 1,
2019, the exclusion amount is $2,000,000.]2
3[For the transfer of the estate of each
resident decedent dying on or after January 1, 2[2019] 20182 , but before January 1, 2020, the 2[exclusion amount is $3,000,000] tax imposed by this section shall
be based upon the applicable exclusion amount determined pursuant to subsection
(c) of section 2010 of the federal Internal Revenue Code (26 U.S.C. s.2010), as
amended or adjusted by federal law, rule or regulation2 .]3
(c)
The amount of tax liability of a resident decedent determined pursuant to
subparagraphs (a) and (b) of this paragraph shall be reduced by the aggregate
amount of all estate, inheritance, succession or legacy taxes actually paid to
any state of the United States, including inheritance taxes actually paid this
State, in respect to any property owned by that decedent or subject to those
taxes as a part of or in connection with the estate; provided however, that the
amount of the reduction shall not exceed the proportion of the tax otherwise
due under this subsection that the amount of the estate's property subject to
tax by other jurisdictions bears to the entire estate taxable under this chapter.
(4)
For the transfer of the estate of each resident decedent dying on or after
January 1, 3[ 2020] 20183 , there shall be no tax imposed.
3[(5) Upon the transfer of the real or
tangible personal property within New Jersey of each nonresident decedent dying
on or after January 1, 2017, but before January 1, 2020, which tax shall bear
the same ratio to the entire tax which that estate would have been subject to
pursuant to subparagraphs (a) and (b) of paragraph (3) 2and paragraph (4)2 of this subsection if that nonresident decedent had been a
resident of this State, and all of the decedent’s property, real and personal,
had been located within this State, as the taxable property within this State
bears to the entire estate, wherever situated.]3
b. (1) In the case of the estate of a decedent
dying before January 1, 2002 where no inheritance, succession or legacy tax is
due this State under the provisions of chapters 33 to 36 of this title or under
authority of any subsequent enactment imposing taxes of a similar nature, but
an estate tax is due the United States under the provisions of any federal
revenue act in effect as of the date of death, wherein provision is made for a
credit on account of taxes paid the several states or territories of the United
States, or the District of Columbia, the tax imposed by this chapter shall be
the maximum amount of such credit less the aggregate amount of such estate,
inheritance, succession or legacy taxes actually paid to any state or territory
of the United States or the District of Columbia.
(2) In
the case of the estate of a decedent dying after December 31, 2001, but
before 2[December 31, 2016] January 1, 20172, where no inheritance, succession or legacy tax is due this State
under the provisions of chapters 33 to 36 of this title or under authority of
any subsequent enactment imposing taxes of a similar nature, the tax imposed by
this chapter shall be determined pursuant to paragraph (2) of subsection a. of
this section.
