What Is Line 29 on the NJ-1040 for Property Tax?
Understand the purpose of Line 29 on the NJ-1040. This guide helps New Jersey homeowners and tenants correctly claim the state's property tax benefit.
New Jersey offers a property tax benefit to eligible residents, which is claimed on the NJ-1040 income tax return. This benefit is a separate calculation that results in either a deduction that lowers the income on which you are taxed or a direct credit against your tax liability.
Eligibility for the Property Tax Benefit
To qualify for New Jersey’s property tax benefit, you must meet specific criteria as either a homeowner or a tenant. Homeowners must have owned and occupied a principal residence in New Jersey and paid property taxes on that home. For multi-unit properties, the home must have four or fewer units, with only one used for commercial purposes. There are no income limits to receive this benefit, and it is available regardless of the taxpayer’s age.
Tenants can also qualify for the property tax benefit. The requirements are that you rented and occupied a principal residence in New Jersey and paid rent during the year. The rental property must have been subject to local property taxes.
Calculating the Property Tax Benefit
Homeowners need their total property taxes paid for the year, which can be found on a property tax bill or Form 1098 from a mortgage lender. For tenants, 18% of the rent paid during the year is considered property taxes for the purpose of claiming this benefit.
The state offers two options: a property tax deduction or a property tax credit. The deduction allows you to subtract the amount of property taxes you paid, up to a maximum of $15,000, from your gross income. The alternative is a refundable credit, which is a flat $50.
To determine the final amount, you must complete Worksheet H, the Property Tax Deduction/Credit worksheet, which is included with the NJ-1040 instructions. This worksheet guides you through a side-by-side comparison. You will enter your property tax information and your taxable income to see how the deduction reduces your taxable income versus simply taking the flat credit, and the worksheet will direct you to the option that results in a lower tax liability.
Claiming the Benefit on Your NJ-1040
After using Worksheet H to determine your benefit, you will apply the result to your NJ-1040. If the deduction is more beneficial, enter the calculated amount on the designated line for the property tax deduction. If the $50 credit provides a better outcome, claim that amount on the line for the property tax credit. You must also check the box indicating which benefit you are taking.