Should I deduct a NJ 2015 Homestead Benefit Rebate check amount from my paid 2018 property taxes? The check arrived in 2018 for property owned in 2015.

[colonylakes]

In 2018, I received a check from the NJ Homestead Rebate Benefit program for property that I used to own in 2015.  Should I deduct the check's amount from the property taxes that I paid in 2018 and enter the balance as my 2018 paid property taxes?  The check is not NJ state income tax refund.

[MichaelMc · Accepted solution]

The Homestead Rebate should only be included in taxable income for 2018 if, in 2015, you itemized deductions and actually benefited from the deduction of the property tax.

The income recognition principle at work here is exactly the same as that applied to refunds of state income tax.

[leeleses]

Does this apply to the 2015 Federal Return, or only to the 2015 NJ State return?  And, where would this be found on the 2015 return?  I got a check in 2018 for the 2015 Rebate for $239...

[leeleses]

And why do you get a rebate several years after the year it was for?

[colonylakes]

As for getting a 2015 rebate check in the year 2018, one must ask the State of NJ.

2015 Federal Return:
In 2015, I itemized my deductions - I used Schedule A and was able to deduct my entire property taxes from my taxable income.  In 2018, when I finally received the NJ rebate check for the property tax year 2015, I must enter the rebate amount on my 2018 Fed 1040 form as state and local refunds.  The rebate check amount becomes taxable income on my 2018 fed tax form.
If I did not itemize my deductions in 2015 (did not use Schedule A),  I would not have benefitted in 2015 by reducing my taxable income by deducting my entire property tax amount, and therefore would not add the rebate check to my taxable income in 2018.
TurboTax will guide you through this in the state and local refund area.  Turbo asks the year of the property tax rebate (my case - 2015). Did I use Schedule A in my 2015 Fed tax return? (yes). Was the entire rebate check amount deducted from my 2015 tax return? (yes). Therefore the rebate check amount becomes taxable income in my 2018 return.  

[leeleses]

Thank you for this answer!  I like the way you explained it too!

[fanfare]

after owning a home in 2015, you have most of 2016 to apply for the rebate.
then the forms have to be processed so that puts us into 2017. Since NJ is slow, you're lucky you get anything in 2018.

[leeleses]

Interesting.  So this isn't one of those credits Turbotax "finds" for you automatically?  You have to apply for it and fill out forms?  Thank you.