New Jersey Property Tax Credit: Eligibility for the Property Tax Deduction/Credit

Homeowners and tenants who pay property taxes, either directly or through rent, on their principal residence in New Jersey may qualify for either a deduction or a refundable credit.The Property Tax Deduction reduces your taxable income.  Therefore, the tax benefits varies depending on the amount of your taxable income, the amount of your property taxes or rent, and your filing status.  The Property Tax Credit reduces your tax due.  The credit increases the total payments and/or credits.  These payments and/or credits are subtracted directly from your tax liability. Eligibility Requirements - To be eligible for a property tax deduction or property tax credit:

• You must have been domiciled and maintained a principal residence as a homeowner or tenant in New Jersey during 2012; and
• Your principal residence, whether owned or rented, must be subject to local property taxes, and property taxes must have been paid on that residence either as actual property taxes or through rent; and
• Your rented dwelling must have its own separate kitchen and bath facililies; and
• Your gross income on Line 28 is more than $20,000 ($10,000 if filing status is single or married/CU partner, filing separate return), or you (and/or your spouse/civil union partner if filing jointly) were 65 years of age or older or blind or disabled on the last day of the tax year.

Note: Taxpayers who were not 65 years of age or older or blind or disabled on December 31, 2012, with gross income of $20,000 or less ($10,000 if filing status is single or married/CU partner, filing separate), are not eligible for a property tax credit.

Principal Residence- A principal residence means a homestead, either owned or rented, actually and continually occupied as your permanent residence. Do not include property taxes paid for a vacation home, a “second home,” or property which the owner rents to someone else.

Homeowners- Enter as a credit the property taxes paid for the home in New Jersey that you owned and lived in as your principal residence. Both single-family homes and certain multi-unit properties may qualify. See below.

• Multiple Owners- If you own your principal residence with someone else (other than your spouse/civil union partner) enter the amount of property taxes paid that reflects your percentage of ownership in the property. 
• Multi-Unit Properties- If you own a multi-unit property and occupy a portion of the property as your principal residence, enter the property taxes paid for the percentage of the property you occupy. Enter an amount on the credits line only if the property contains four units or less, and of these four units, only one may be used for commercial purposes.
• Condominiums and Co-ops- A condominium unit or a unit in a cooperative housing complex or mutual housing corporation is considered a single-family dwelling.
• Continuing Care Communities- As a resident in a continuing care retirement community, you are considered a homeowner if the continuing care contract requires you to pay the proportionate share of property taxes attributable to your unit.
• Disabled Veterans - Totally and permanently disabled veterans who have a 100% exemption from local property taxes do not enter an amount in the credits menu. If any portion of the dwelling is rented to a tenant and property taxes are paid by the disabled veteran owner on the rented portion, such taxes may not be entered as a credit on the property owner’s return. However, eligible tenants may enter 18% of the rent paid on their own income tax returns.
• P.I.L.O.T. Payments- Do not enter a credit for P.I.L.O.T. (Payments-in-Lieu-of-Tax) payments you made to your municipality as a homeowner. These payments are not property taxes.
• Life Tenancy- You are considered to be a homeowner if you have life tenancy rights or hold a lease for 99 years or more.

Tenants - Enter as a credit the amount of property taxes paid for a home or apartment you rented in New Jersey and lived in as your principal residence, provided that the building is subject to local property taxes and your dwelling unit contains its own separate kitchen and bathroom that are not shared with others in the building. For tenants, 18% of the rent paid during the year is considered property taxes paid.

• Mobile Homes- If you own a mobile home which is located in a mobile home park, you are considered a tenant. For more information on mobile homes, contact the New Jersey Division of Taxation Customer Service Center.
• Tax-Exempt, Subsidized, and Campus Housing- Tenants living in dwellings which are not subject to local property taxes do not enter 18% of the rent paid as a credit. This includes: tenants living in tax-exempt housing or other dwellings owned by the State, County, Municipal, or Federal government; students living in on-campus apartments at State colleges and universities; tenants living in dwellings owned by religious, charitable, or other nonprofit organizations (including on-campus apartments at private nonprofit colleges and universities), if the property is exempt from local property taxes; and tenants who lived in a dwelling on which P.I.L.O.T. (Payments-in-Lieu-of-Tax) payments were made to the municipality.

Note: Do not enter a credit or deduction if the dwelling you rent is not subject to local property taxes. If you are not sure whether the dwelling you rent is subject to local property taxes, contact your building manager or the municipal tax assessor for information.

The Division of Taxation audits returns to ensure compliance with these requirements.

Calculating the Amount to Enter as a Credit - Review the information below for determining the amount of property taxes to enter as a credit if:

• You had more than one New Jersey residence during 2012; or
• Your principal residence had multiple owners or multiple tenants, or consisted of multiple units; or
• You and your spouse/civil union partner file separate returns but maintain the same principal residence; or
• You were a part-year resident.

Spouses/Civil Union Partners Filing Separate Returns, but Maintaining Same Principal Residence
If you and your spouse/civil union partner file separate returns but maintain the same principal residence, enter a credit for one-half of the property taxes (or one-half of 18% of rent) due and paid.
Multiple Residences, Owners, Units, or TenantsComplete Worksheet F-1 before entering a credit if:

• You lived in more than one qualifying New Jersey residence during 2012; or
• You shared ownership of a principal residence during the year with anyone other than your spouse/civil union partner; or
• A principal residence you owned during the year consisted of multiple units; or
• Anyone other than your spouse/civil union partner occupied and shared rent with you for an apartment or other rental dwelling unit; or
• You were both a homeowner and a tenant during the year.

If you were a homeowner, enter the amount from line 4, Worksheet F-1 as your credit. If you were a tenant, enter the amount from line 9, Worksheet F-1 as the credit. If you were both a homeowner and a tenant during the year, add the amount from line 4, Worksheet F-1 and the amount from line 9, Worksheet F-1 and enter the total as a credit.

If you lived for part of the year in a residence that did not meet the requirements do not enter as a credit any property taxes paid for the period of time you lived in that residence. However, if you moved during the year and lived for part of the year in a residence that qualifies, complete Worksheet F-1 for the qualified residence only. Do not list any information pertaining to the nonqualified residence.

Part-Year Residents - If you were a part year New Jersey resident, and you were either a qualified homeowner or tenant, or both a homeowner and a tenant during the part of the year you lived in this State, enter a credit for the total amount of property taxes (or 18% of rent) due and paid during your period of residence.
For additional information pertaining to the New Jersey Property Tax Credit/Deduction, please click here.   Contact ExactCPA if you have any other questions.