DIFFERENCES
BETWEEN
FEDERAL AND NEW JERSEY TAX LAW
DIFFERENCES BETWEEN FEDERAL
AND NEW JERSEY TAX LAW
DIFFERENCES BETWEEN FEDERAL
AND NEW JERSEY TAX LAW
 General
 Losses are not permitted anywhere on the
New Jersey tax return; leave line blank
 Itemized Medical Expense in excess of 2% of
NJ Gross Income reduce taxable income.
 NJ allows either a Property Tax Deduction or
a Property Tax Credit
 NJ allows a credit for Income Taxes paid to
other jurisdictions.
 No deduction for Sales Tax
Exemptions - Line 6
 Taxpayer always gets a deduction for self on
New Jersey return
May be disallowed on Federal return
 Civil Union Partner Exemption allowed on
New Jersey return
Not allowed on Federal return
 Domestic Partner Exemption allowed on New
Jersey return
Not allowed on Federal return
Exemptions - Line 7
 Additional Exemptions for age
on New Jersey return
 Addition(s) to Standard Deduction for age
on Federal return
 Civil Union Partner allowed on New Jersey return
Not allowed on Federal Return
Exemptions - Line 8
 Additional Exemptions on New Jersey return
if Blind or Disabled
 Addition(s) to Standard Deduction on Federal
return for blind
No addition(s) to Standard Deduction on
Federal return for disability
 Civil Union Partner allowed on New Jersey return
Not allowed on Federal return
Exemptions - Line 11
 Additional Exemption(s) on New Jersey
return
TaxWise: Must be entered
 Adjustment to income or tax credit on
Federal return
Income not taxable on New Jersey return
  Federal Social Security
and Tier 1 Railroad Retirement Benefits
May be partially taxable on Federal return
  Tier 2 Railroad Retirement Benefits
May be fully or partially taxable on
Federal return
Income not taxable on New Jersey return
  United States military pensions
reported on Form 1099-R by the US Defense
and Accounting Service
Fully taxable on Federal return
  Qualifying scholarships or fellowship
grants
May be fully or partially taxable on
Federal return
  Unemployment Compensation
Fully taxable on Federal return
Income not taxable on New Jersey return
  New Jersey Lottery winnings
Fully taxable on Federal return
[Maybe offset with a Schedule A entry for
gambling losses]
  Interest and capital gains from direct
Federal obligations exempt under law
Fully taxable on Federal return
Income not taxable on New Jersey return
  Distributions paid by mutual funds
attributable to interest earned on Federal
obligations
Fully taxable on Federal return
  Certain distributions from New Jersey
Qualified Investment Funds
Fully taxable on Federal return
Income not taxable on New Jersey return
  Homestead rebates and
Property Tax Reimbursements
May be taxable or reduce Schedule A
deduction on Federal return
Line 14 - Wages:
Box 16 (State Wages) from the W-2(s) must be
used on Form NJ-1040, Line 14. This box is often
different than Box 1 (Wages)
Line 15 a – Taxable Interest Income
 Taxable categories differ from Federal rules
See New Jersey Instructions and
Chapter 7 Publication 17.
 TaxWise: Make these adjustments on the
Interest Statement worksheet and/or the
Dividend Statement worksheet.
Line 15b – Tax Exempt Interest
 Exempt Categories differ from Federal
rules See New Jersey Pub GIT-5.
 TaxWise: Make these adjustments on the
Interest Statement worksheet and/or the
Dividend Statement worksheet.
Line 18 – Net gains from disposition
of property:
Exclude gains and losses from NJ Exempt securities
as defined in GIT-5.
 TaxWise: Make adjustments with a scratch pad to
NJ Schedule B line 1. [See NJ EFC Handbook,
pages 16 & 17.]
Line 19 – Pensions, Annuities
and IRA Withdrawals
 Exclude:
 Federal Social Security
 Railroad Retirement (Tier 1 and Tier 2)
TaxWise: Check Railroad Retirement box on the 1099-R screen.
 United States military pensions
[See TAX TIP for Line 19]
TaxWise: Check box 2 of the 1099-R screen.
Line 19 – Pensions, Annuities
and IRA Withdrawals
 General Rule or 3 Year Rule (if applicable)
allowed for NJ calculation.
TaxWise: If 3 Year Rule is/was used, adjustment to
lines 19 will be required.
[See NJ EFC Handbook, page 16.]
 Federal tax exempt distributions from an
IRA for charitable gifts are NJ taxable.
 TaxWise: Must complete NJ IRA Withdrawal
Worksheet for every IRA withdrawal
Line 23 – Net Gambling Winnings:
 Net gambling winnings (excluding New Jersey
Lottery winnings and losses) are reported.
TaxWise: Fill in gambling losses on the W-2G
screen even if Schedule A will not be used. If the
winnings are from the NJ lottery, check the state
return box on the W-2G screen. NJ Lottery losses
are only entered on a W-2G reporting NJ Lottery
winnings.
Line 27a – Pension Exclusion
Line 27 b – Other Retirement Income
Line 27 c – Total exclusion
 Allowed within age and income restrictions.
 Unused Pension Exclusion amount may be carried
over to Line 27 b - Other Retirement Income
Exclusion. Paper returns use Worksheet D
TaxWise: Automatic Calculation
Line 28 – Gross Income
 If gross income is less than $20,000 ($10,000 Single
or Married-Sep), no NJ Tax return is required.
Return should be filed if a refund is due. TaxWise:
If federal return is being e-filed and no NJ return is
required for any reason, then check paper return on
page 3 of the NJ 1040. When it prints, write “DO
NOT FILE” on it. However, if a tenant rebate is
requested, e-file the NJ return, even if it is not
needed for any other reason.
Line 30 – Medical Expenses
 Out-of-pocket expenses exceeding 2% of NJ Gross
Income (line 28). If doing manually, complete
Worksheet E.
TaxWise: enter medical expenses on the Schedule A
detail worksheet, even if Schedule A will not be filed.
 Pre-tax Federal/After-tax NJ medical deductions
(Flex Savings Accounts, for example) should be
included as NJ medical expenses.
TaxWise: enter these using a scratch pad to line 30.
(See NJ EFC Handbook, page 17.)
Line 36a - Property Tax Paid
 Property Tax Due and Paid on taxpayers
qualified principal residence. May be equal
to, less than or greater than the amount
deducted on Schedule A, Form 1040.
 Use the amount shown for Real Estate Tax
from Form 1098, sum of actual payments
and/or 18% of principal residence rent paid.
TaxWise: Amount must be entered on page 3,
Schedule 1, Line 1 Property taxes you paid … .
Line 36b – Home Owner?
 Line 36b should not be completed
if Taxpayer
is a tenant
or
is not a homeowner
on October 1 of Tax Year
Line 36c - Property Tax Deduction
or Line 48 Property Tax Credit
 Use Schedule 1 to determine the greater benefit.
Only one of these lines can be used. Property taxes
and/or 18% of rent paid on principal residence
only.
 Taxpayers eligible for Property Tax Reimbursement
must use base year property tax as Property Tax Paid
TaxWise: enter property tax and/or rent on
Schedule 1 on page 3 of the return. Do not
make entry on 36c or 48.
Line 50 - NJEITC:
 An individual who is eligible for a federal
earned income tax credit will be allowed a
NJEITC credit equal to a percentage of the
federal earned income tax credit allowed.
 The percentage of the federal earned income
tax credit allowed for Tax Year 2008 will be
22.5%
TaxWise: Automatic Calculation
Lines 51 & 52 - Excess UI/DI:
 If two or more employers, complete Form 2450
to determine if excess UI/DI was withheld.
UI/DI information is usually found in Box 14 of
the W-2 Statement.
TaxWise: UI/DI always entered in Box 14.
Confirm entries on the W-2 screen read
“NJSDI” and “NJSUI”.
If needed, Form 2450 will calculate
automatically.
DIFFERENCES BETWEEN
FEDERAL AND NEW JERSEY TAX LAW