Let me do this with numbers. Taxpayer and spouse pay $12,000 of property taxes on their NJ principal residence. They file "married filing separately". On taxpayer's federal return we enter $6,000 for real property taxes. On spouse's federal return we enter $6,000 for real property taxes. On taxpayer's NJ return, the amount of $6,000 flowed from the federal input to the screen for NJ property tax deduction/credit. Same for the spouse's NJ return. We did not check the box that ownership is shared with someone other than your spouse. On the NJ return, taxpayer's deduction for real property taxes is $3,000. Same for the spouse. The related worksheet for each taxpayer and spouse shows the $6,000 and multiplies that by 50% resulting in a deduction of $3000 ( they may end up with the credit, but what if not?). Therefore, on both taxpayer and spouse's NJ returns the property tax deduction is understated by $3000.
We can correct this by changing the real property taxes on the NJ screen from $6,000 to $12,000 for each taxpayer so they each get a property tax deduction of $6,000. But we shouldn't have to override.
Comments welcome. Thanks.
