New Jersey Considers Estate Tax Reform
September 5, 2014
As numerous other states make similar moves, New Jersey is considering estate tax reform.
A bill has been introduced to the New Jersey state legislature that would repeal the inheritance tax and raise the size of the estate tax exemption to the federal level, according to The Real Deal. Currently, New Jersey is one of just two states left in the U.S. to tax both estates and inheritance.
This means that estates that are larger than the state exemption – $675,000 in New Jersey – are first taxed under the estate tax, according to NorthJersey.com. Then, the remaining money can be taxed a second time when it is inherited, up to a maximum rate of 16 percent. Spouses, children and parents are exempt from the inheritance tax, but siblings, cousins, other relatives and friends are not.
The threshold for estate taxes at the federal level is $5.34 million – considerably larger than the New Jersey exemption. The federal exemption is also indexed for inflation, meaning that it increases to stay in line with the value of the dollar.
Proponents for a higher exemption argue that many middle class families accumulate an estate of $1 to $2 million in the form of real estate equity, and that we should not necessarily penalize them for accruing this modest level of wealth over a lifetime.
On the other hand, Department of Treasury data cited by NorthJersey.com found that almost $760 million of the total state budget of $32.5 billion will come from estate and inheritance taxes this year. Those who oppose raising the exemption to the federal level argue that doing so would result in a loss of tax revenues that would have to be paid for another way.
To find out more about how these estate tax reforms will affect you, feel free to speak with a tax attorney at ScarinciHollenbeck.com. If you would like to read more about estate tax reform than take a look at some of our older posts on this topic:
House Republicans Talk About Repealing the Estate Tax
Reduce, Eliminate Your Estate Tax Bill
IRS Extends Estate Tax Break
Taxpayers Can Expect Bigger Estate Tax Credits in 2014