My NJ Tax return not picking property tax deduction but instead picking a credit

[np07310]

Thanks Dave!  My income is >$100k and property tax $10k+ so I assume $50 credit isn't the right option.  But it is what Turbotax assigned me, and there's no way to manually fix this.  A CPA at TurboTax was looking into this last week as he couldn't figure out while on the phone with me, but he never got back to me to close the loop.  Are you sure TurboTax isn't considering my "NJ taxable income" which would technically be cancelled out via credit (something like NJ-COJ) since I work in NY?

[ErnieS0]

TurboTax is correct. The property tax credit is better because your NY other state tax credit will offset all your NY income without needing to deduct property taxes. Therefore it is better to use the credit, since the property tax deduction is unnecessary to reduce your NJ tax liability (net of the NY credit). This is NJ’s computation which TurboTax uses.

Schedule NJ-COJ computes the allowable credit with or without the $10,000 property tax deduction. In this example, the max credit with the $10,000 deduction is $3,545 and $4,182 without it.

Worksheet I shows no tax is owed whether the property tax is deducted or not. Therefore is it better not to deduct any property tax, since the deduction is not needed—and claim the credit instead.

[np07310]

Oh wow - this is quite surprising to hear.  This essentially means I don't get any state tax deduction from being a homeowner just because I work in NY and live in NJ.  That seems unfair.  Would think NY would somehow take this into account, otherwise many people in my situation wouldn't get any tax benefits from owning a home at all...   

[DaveF1006]

Please reread Ernie50 explanation given above. You are given a tax credit for working in the state of New York. The property tax credit is better because your NY other state tax credit will offset all your NY income without needing to deduct property taxes. The property tax deduction is unnecessary to reduce your NJ tax liability (net of the NY credit).  

Ernie50 has taken the time to work this out and he determined the credit was the best solution to take because by taking the deduction, the credit would be $3545 and $4182 without it.    

Think of it this way. You can choose to take the $10,000 deduction but would you rather have $3545 in your pocket or $4182? The tax code can be tricky sometimes and confusing but it is in accordance to the way it is designed. 

[np07310]

Thank you Dave and Ernie.  Appreciate your help!  Definitely wasn't trying to come off as doubting your recommendation, but it does seem like whether or not I own a home in NJ does not make any difference in my state taxes owed.  I used to think home ownership meant some tax benefits, and I get that it most often doesn't anymore at the federal level given high standard deduction, but for states I always thought it would lead to some tax savings.  The logic here seems super convoluted and as if the law is trying to punish home ownership 🙂

[jigarym]

Yes this seems weird to me. There are millions of NJ homeowners who work in NYC and their property taxes are above 10K/15K.

According to the  "Worksheet I instructions", there is special handling for New York State workers.

"Income From New York. When claiming a credit for taxes paid to New York, the amount on line 1 must reflect the “New York State Amount” actually taxed by New York from the New York IT-203. Certain adjustments may be necessary to determine the income actually taxed by New York. If you are subject to the New York tax on lump-sum distributions, complete separate Schedule NJ-COJs for the ordinary income and the lump-sum distribution."

I am not sure if the language is vague OR There is some way to override this deduction/credit choice.?

[ErnieS0]

There is no way to choose the property tax credit or deduction. The worksheets provided by the State of New Jersey are used to determine which method provides the greater tax benefit.

It may seem that deducting $10k/$15k of property tax is more beneficial than claiming a $50 tax credit. However if your NY other state tax credit has reduced your NJ tax liability to less than $50 without taking into account the property tax deduction, then the credit is better.

[slavic]

Hi Ernie, i have the same issue, i think if i would deduct $5227 property taxes i will pay less NJ taxes.

Turbotax wants to do $50 credit, totally i have to pay $270 to NJ, if i would do $5227 property tax deduction i would  have to pay $0 to NJ i am right ? 

Your New Jersey Bottom Line (NJ-1040)

Based on what you've entered so far, your New Jersey tax due is $270.

Taxable Income     New Jersey Gross Income $171,483   Less: Personal Exemptions $1,000       ____________ New Jersey Taxable Income $170,483         Taxes and Credits     New Jersey Income Tax $8,734   Less: New Jersey Credits $8,414       ____________ Net Tax $320         Payments     New Jersey Tax Withholding $0   Refundable Credits $50       ____________ Total Payments $50               Tax Balance Due $270

[ReneeM7122]

@slavid  you are correct.  If Turbotax calculates a $50 credit, and you pay $270 to NJ, then with a $5227 property tax deduction you would have  pay $0 to NJ.

[jigarym]

The problem is that Turbotax should show both options and their effect on the final tax numbers. This way the taxpayer is assured that the selection of Credit Vs Deduction is correct. 

[lcolantuoni14]

My son rented off campus apartment for 4 months in apartment complex.  He made more than 10k agi

But it isnt clear if he can take the credit so i answered no but turbotax keeps giving him the credit...

read differnt info on nj site says he qualifes if makes over 10k but other sources say makes over 10k and is over 65 or disbaled end of year - on nj site it says OR not AND

does he qualify and if not how do i removed the $50 credit!  And when I pay - directions say to pay whats on line 44 - but that is the amount before credit istaken off - i am filing extnsion so need to know waht to pay today

[lcolantuoni14]

Just read this:

New Jersey: In New Jersey, renters have two choices when it comes to the renter's tax credit. The first is to take a deduction on their taxes of 18% of the amount paid in rent, while the second is a flat $50 credit on their taxes.

so based on my son  paid 5804 then why isnt turbotax doing 18% deduction of $1044 instead doing credit of $50

[DaveF1006]

It depends. The property tax deduction is a itemized deduction. Your son may be claiming the standard deduction, which may be a bigger benefit than an itemized deduction.  If so, the property tax credit is the only tax benefit he is eligible for. 

[Allthethings]

I stumbled upon this thread and wondering if anyone can clear this up for me.

I work for a NY company, so it determines that the Property Tax Credit is better for me.

However, my wife works for a NJ company, so it determines that taking the Property Tax Deduction is better for her.

Is it allowed that I can take the credit while she takes the deduction if we are married filing separately? Or do we have to force TT to have us take the same thing (whether it's credit or deduction)?

Furthermore, the property was acquired before marriage with the title being held as Tenants in Common. Vesting prior to our refinance post-marriage read "Me as to a 1/3 interest and Wife as to a 2/3 interest." After our refinance, the only vesting title change was to add the word married after "2/3 interest." Is the credit/deduction still 1/3 for me and 2/3 for wife or is it 50-50 regardless of the vesting? We've paid from a joint account.

I understand that usually it is better for married couples to file jointly, but based on my numbers crunching last night, I think separately might better work in our favour since the majority of our medical expenses in 2021 were paid with wife's HSA funds plus her work premiums (which all count as medical expenses for a NJ return since NJ doesn't see the same tax advantages on HSAs that you see federally).

[MarilynG1]

From your property title info, you could take 1/3 of the property tax credit/deduction and your wife could take 2/3, even if paid from a joint account.

If your property just had both your names on it, you could divide the Property Tax any way you agree on. 

For New Jersey, your Filing Status has to be the same as your Federal filing status.

For each of your separate portions, you could either take the credit or the deduction on your individual separate returns.

Click this link for more info on the New Jersey Property Tax.