New Jersey Property Tax (2024)

Quick Reference

Property Tax Rates

Highest average rates in the nation:

Average effective rate: 2.47% of home value (2024)

Wide variation by municipality: - Low: approximately 0.90% (some rural areas) - High: over 3.00% (some urban areas, high school costs)

Example: - Home value: $400,000 - Average rate: 2.47% - Annual property tax: $9,880

Property Tax Deduction (Income Tax)

Limited deduction available on NJ income tax return:

Maximum deduction: - $15,000 per return (all filing statuses)

Income limits: - No income limit for deduction - Available to all taxpayers who itemize medical expenses or qualify for other deductions

How it works: - NJ allows very few deductions - Property tax deduction is one of the few - Deduction reduces NJ taxable income - Value depends on marginal tax rate

Benefit calculation: - Property tax paid (up to $15,000) x NJ marginal rate - Example: $15,000 x 10.75% = $1,613 maximum benefit for top earners

Property Tax Credit (Refundable)

Refundable credit available to homeowners and tenants:

Homeowners: - Must own and occupy principal residence - Income limits apply

Income limits (2024): - $150,000 (homeowners) - $250,000 (senior and disabled homeowners)

Maximum credit: - Varies based on income and property taxes paid - Up to $3,000 for some senior homeowners

Tenants: - Credit for tenants (18% of rent deemed property tax) - Income limit: $150,000

Details

Why NJ Property Taxes Are So High

Multiple factors contribute:

Local government structure: - 565 municipalities in NJ - Each with own government, services - Duplication of services

School funding: - Property taxes fund local schools - School taxes largest component (typically 50-60% of property tax bill) - High per-pupil spending in many districts

Limited state aid: - NJ provides less state aid to municipalities than many states - Forces greater reliance on property taxes

High cost of living: - Salaries, pensions for public employees - Expensive real estate

Abbott districts: - Court-ordered funding for poor urban districts - Funded partially through property taxes in wealthier districts

Property Tax Bill Components

Typical property tax bill includes:

Municipal tax: - For local government services (police, fire, public works, etc.) - Typically 20-30% of total

School tax: - For local school district - Typically 50-60% of total - Largest component

County tax: - For county government services - Typically 15-25% of total

Special assessments: - Library, fire district, open space, etc. - Varies by location

Assessment and Revaluation

Assessment ratio: - Property assessed at fraction of market value in many towns - Assessment ratio varies by municipality - Some towns at 100% (recent revaluation), others at 20-30% (old assessment)

Revaluation: - Municipalities must periodically revalue all property - Brings assessments to current market value - Does not necessarily increase total tax revenue (rates adjust)

Tax calculation: - Assessed value x tax rate = property tax - If assessments rise, rates typically fall (revenue-neutral)

Appeals: - Property owners can appeal assessments - File by April 1 (or later in revaluation year) - Must show assessment exceeds market value

Property Tax Deduction (Income Tax)

Claimed on NJ income tax return:

Schedule A: - Property Tax Deduction/Credit worksheet - Enter property taxes paid on principal residence - Maximum $15,000 deduction

Limitations:

Principal residence only: - Must be primary home - Second homes, rental property not eligible

Actual taxes paid: - Based on actual payments during year - Not based on assessment or bill date

No income limit: - Available regardless of income - But value depends on marginal rate

Interaction with federal: - Federal SALT deduction limited to $10,000 - NJ deduction separate from federal - Can claim both (subject to respective limits)

Property Tax Credit (Refundable)

More valuable than deduction for many taxpayers:

Homeowners:

Eligibility: - Own and occupy principal residence - Income under $150,000 (regular) - Income under $250,000 (seniors/disabled)

Credit amount: - Based on formula considering: - Income - Property taxes paid - Age and disability status - Municipality

Senior/disabled homeowners: - Higher income limit ($250,000) - Larger potential credit - Age 65+ or 100% disabled

Calculation: - Complex formula - Software or tax preparer typically calculates - Maximum approximately $3,000 for eligible seniors

Tenants:

Eligibility: - Rent principal residence in NJ - Income under $150,000

Credit calculation: - 18% of rent deemed property tax - Credit based on deemed property tax and income

Maximum credit: - Varies by income - Typically lower than homeowner credit

How to claim: - File NJ-1040 (resident return) - Complete Schedule A (Property Tax Deduction/Credit) - Credit is refundable (get refund even if no tax liability)

Senior Freeze Program

Separate program for seniors:

Eligibility: - Age 65+ or disabled - Own and occupy residence for at least 3 years - Income under $170,543 (2024)

Benefit: - Reimburses increase in property taxes after base year - Freezes property tax at base year level - Reimbursement provided as credit

Application: - Must apply annually - PTR-1 form (Property Tax Reimbursement Application) - Due by October 31 of year following base year

Example: - Base year property tax: $10,000 (2022) - Current year property tax: $11,000 (2024) - Senior Freeze reimbursement: $1,000

Not a credit on income tax return: - Separate reimbursement program - Check mailed to taxpayer - Not claimed on Form NJ-1040

Veterans' Property Tax Deduction

Partial property tax exemption for veterans:

Eligibility: - Honorably discharged veteran - Served in qualified conflict - Own and occupy residence

Deduction amount: - $250 annual deduction from property tax bill - Applied directly to property tax (not income tax)

100% disabled veterans: - Full property tax exemption - No property tax owed on principal residence

Surviving spouse: - May continue exemption if not remarried

Application: - File with municipal tax assessor - One-time application (continues until ineligible)

Homestead Benefit (Abolished)

Historical program (no longer available):

Previous program: - Homestead rebate or credit - Based on income and property taxes paid - Provided rebate check to homeowners

Status: - Abolished and replaced with property tax credit (above) - Some taxpayers still refer to it as homestead benefit

Replacement: - Property tax credit on income tax return (Schedule A) - Serves similar purpose

Planning Strategies

Maximizing deduction: - Pay property taxes in high-income years - Accelerate payment if tax rate rising

Credit vs. deduction: - Credit more valuable (refundable, direct reduction) - Deduction only valuable if itemizing and in high tax bracket

Senior Freeze: - Apply as soon as eligible - Establishes base year - Earlier application = more years of benefit

Veterans: - Ensure application filed with municipality - 100% disabled should apply for full exemption

Appeals: - If assessment excessive, file appeal - Lower assessment = lower tax - Deadline typically April 1

Citations

New Jersey Statutes: - N.J.S.A. 54:4-1 et seq. - Property Taxation - N.J.S.A. 54A:3A-15 - Property Tax Deduction - N.J.S.A. 54A:4-8 - Property Tax Credit

Regulations: - N.J.A.C. 18:35-1 et seq. - Gross Income Tax Regulations - N.J.A.C. 18:12-1 et seq. - Property Tax Administration

NJ Division of Taxation: - Property Tax Deduction/Credit Information - Senior Freeze Program (PTR) information - https://www.state.nj.us/treasury/taxation/ptr/

Forms: - Form NJ-1040 - Resident Income Tax Return - Schedule A - Property Tax Deduction/Credit - Form PTR-1 - Property Tax Reimbursement Application (Senior Freeze)

Municipal Tax Assessor: - Contact local tax assessor for property tax bills, assessments, appeals - Veterans' exemption applications

Other Resources: - NJ Property Tax Guide (Division of Taxation) - Local municipal websites for tax rates and assessments - County Board of Taxation for assessment appeals