With housing affordability concerns running higher than ever in New Jersey, lawmakers have revived a plan to enhance a tax break for the state’s more than 1 million renters.
A proposal to increase the share of annual rent payments that can be deducted from state income taxes cleared a key Senate committee this month.
The bill’s sponsors are pointing to a report published by the National Low Income Housing Coalition that ranks New Jersey among the least affordable states to rent an apartment.
Fair-market monthly rents in New Jersey have soared above $2,000 for a typical two-bedroom unit, meaning households must earn nearly $40-an-hour to afford rent and other expenses, according to the report.
“More than one-third of New Jersey households are renters, and many are paying far more than they can reasonably afford,” said Sen. Troy Singleton (D-Burlington), the bill’s primary sponsor.
For decades, New Jersey has offered residents a state income tax deduction as a form of property tax relief. This is atop direct rebates provided to many homeowners and renters through state-funded relief programs like Anchor, Senior Freeze and Stay NJ.
The deduction lowers a resident’s taxable income, typically resulting in a lower state tax bill.
Depending on their annual property taxes, New Jersey homeowners can take a state income tax deduction worth up to $15,000 under current law.
‘Meaningful dollars’
Tenants — who pay property taxes indirectly through their rents — can also qualify for the income tax deduction, with current law allowing a write-off worth 18% of annual rent payments.
The bill up for consideration in the Legislature, which is controlled by Democrats, would increase the share of annual rent payments that qualify for the property tax deduction to 30%.
It would also increase a tax credit that can be provided to renters not claiming the deduction to $250 from $50.
The measure was unanimously approved this month by the Senate Budget and Appropriations Committee.
“By increasing the percentage of rent that qualifies for the property tax deduction and raising the credit amount to $250, we are putting meaningful dollars back into the pockets of tenants who are feeling squeezed every month,” said Singleton, who serves as chairman of the Senate Community and Urban Affairs Committee.
This isn’t the first time lawmakers have attempted to sweeten the write-off for renters. An earlier version of the proposal cleared the Senate with bipartisan support in 2022, but it failed to advance in the Assembly that year.
This year’s push to revive the legislation, though, comes as housing affordability remains a growing concern in New Jersey.
The average property tax bill levied in New Jersey last year increased by $475 to a record $10,570, NJ Spotlight News reported.
The 18% limit on the state income tax deduction for renters was set in 1996, when the average property tax bill was much lower, according to state data.
Meanwhile, the annual rate of inflation in the U.S. topped 4% in May, besting the rate of annual wage growth, according to the Bureau of Labor Statistics.
“At a time when rents are rising faster than wages, we have a responsibility to make sure our tax code reflects the realities facing New Jersey families,” said Senate President Nicholas Scutari (D-Union), a co-sponsor of the bill.
Preserving a bonus
A $60.7 billion budget plan put forward by Gov. Mikie Sherrill in March allocates more than $4 billion for direct property tax relief. This includes more than $835 million to fund the latest round of state income tax deductions for property taxes.
Increasing the tax break offered to renters and raising the credit would cost as much as $231.5 million annually, according to an estimate compiled by the nonpartisan Office of Legislative Services.
While Sherrill, a first-term Democrat, has called for restrained state spending during the fiscal year that begins July 1, several groups are urging state policymakers to do more to aid renters, including seniors living on fixed incomes.
Sherrill’s budget plan seeks to preserve a $250 bonus for income-qualified renters provided through the Anchor program that is due to expire at the end of the month. She is also urging lawmakers to reduce spending on the Stay NJ program, which benefits only senior homeowners, including those making up to $500,000 annually.
Under Sherrill’s plan, which remains pending in the Legislature, the income ceiling for Stay NJ would be reduced to $250,000, and the maximum benefit would be cut to $4,000 from $6,500.
A recent report from New Jersey Policy Perspective, a Trenton-based think tank, suggests Sherrill and lawmakers can do even more to aid senior renters, who generally face higher poverty rates than their counterparts who own homes.
“A reform that truly matched relief to need would lower the (Stay NJ) income limit further and extend help to renters,” the report said.
This story is made possible in part by the Corporation for Public Broadcasting, a private corporation funded by the American people.
