10.31.16 | SALT Chat
While it has been a long and sordid journey, the traffic cones have been lifted and the barriers cleared. Not being an estate and gift tax expert, that was certainly my first impression when I read that New Jersey lawmakers finally agreed to phase out the estate tax, raise the gas tax by 23 cents a gallon, gradually lower the sales tax rate, and provide an exemption for retirees.
First, the good news: For decedents dying on or after January 1, 2017, the NJ Estate Tax exclusion increases from $675,000 to $2,000,000. For decedents dying on or after January 1, 2018, the tax is completely eliminated. Here is the catch though: New Jersey still has in place and currently has no plans to eliminate the Inheritance Tax. Leave money to the right relatives and (on or after 1/1/18) no tax applies. Leave money to friends or the wrong relatives and your estate may be in for a big surprise.
The soon to be eliminated Estate Tax applies only to lineal descendants, defined as those in the direct line of descent (grandparent to parent, parent to child). The here-to-stay Inheritance Tax applies to everyone else, including collateral descendants (siblings, cousins) and friends. So with a top rate of 16% and a virtually nonexistent exemption, decedents leaving bequests to friends and cousins will still end up with a large tax bill.
The recently signed legislation implements the controversial 23 cent per gallon gas tax increase effective November 1. On a positive note for taxpayers, on January 1, 2017, the sales tax rate will drop from 7 percent to 6.875 percent. An additional decrease to 6.625% is scheduled for January 1, 2018. Veterans will be getting a personal exemption and retirees will enjoy an increased exclusion on retirement income phased in over a four year period till it reaches $100,000.
Questions about changes in New Jersey tax law? Contact me at WBerkowitz@BerdonLLP.com or your Berdon advisor.
Wayne Berkowitz, a tax partner and head of the State and Local Tax Group at Berdon LLP, advises on the unique requirements of governments and municipalities across the nation.
 New Jersey and Maryland are the only states that have both an estate and inheritance tax.