The NJ Homestead Benefit reduces the taxes that you are billed. Because the benefit is no longer handled as a rebate, it is no longer accounted for on your federal (or NJ) tax returns.
When you report your property taxes paid, you already account for this benefit. You would only have over-deducted if you ignored the property taxes paid when taking a deduction, and instead used the rate from your green card or the yearly rate based on an assessment.
So, if your property taxes in 2016 were $8000 and you received a Homestead Credit that year of $150, you would only have paid $7850. You deduct $7850, and you do not recover the $150 as income.
This is different than how it used to be handled, as they used to issue a check. If you account for the benefit as income now, you will be paying taxes on it twice-
Once, as income. Twice, because the rebate reduces the taxes you pay in the current year.
The NJ Homestead Benefit reduces the taxes that you are billed. Because the benefit is no longer handled as a rebate, it is no longer accounted for on your federal (or NJ) tax returns.
When you report your property taxes paid, you already account for this benefit. You would only have over-deducted if you ignored the property taxes paid when taking a deduction, and instead used the rate from your green card or the yearly rate based on an assessment.
So, if your property taxes in 2016 were $8000 and you received a Homestead Credit that year of $150, you would only have paid $7850. You deduct $7850, and you do not recover the $150 as income.
This is different than how it used to be handled, as they used to issue a check. If you account for the benefit as income now, you will be paying taxes on it twice-
Once, as income. Twice, because the rebate reduces the taxes you pay in the current year.
That makes sense for the Federal, but what about when I file with NJ? In the 2017 NJ 1040 Book page 31 it says to add the amount you paid plus the amount of the homestead rebate. Using the example above-- for NJ state filing would you write the full $8000 (so that the full amount is counted in as a deduction)
I agree with your analysis. Last year, turbotax didn't account for the nj instructions of reporting the full property tax, not the net taxes paid because of the rebate when I prepared my return. If i recall correctly, it netted it out automatically so I had to manually file my state taxes to account for the full amount. I'll see when I get to the 2019 return to see if it's done correctly.