Hopewell Township taxpayers, already reeling under recent changes in federal tax law capping state and local tax deductions to $10,000 for federal income tax purposes, may be offered some relief at the state level.
Gov. Phil Murphy called on state lawmakers to enact a law that would allow property owners to make an end run around the $10,000 cap through voluntary contributions to charitable funds set up for municipalities and school districts, equal to the amount of property taxes.
Hopewell Township Mayor Kevin Kuchinski, who attended the New Jersey Conference of Mayors earlier this month where Murphy spoke, looked favorably on the governor’s proposal. Nearly three dozen states already allow municipal charities as an offset to property taxes.
In Hopewell Township, the average property tax bill is $12,952.
The governor’s proposal would allow property owners to claim the contribution as a charitable deduction, reducing their income for federal tax purposes. The Internal Revenue Service allows taxpayers to “write off,” or deduct, the amount of money they give to charities. There is no cap on that amount.
Murphy said he had begun working with state lawmakers to protect New Jersey taxpayers, adding that “we must eliminate any and all barriers to creating a system that will provide tax relief to property taxpayers who make charitable contributions to their municipality.”
“We have not seen any details, [but] we are interested in doing anything we can to save our residents money. I am hopeful that Gov. Murphy and the Legislature will take action on it,” Kuchinski said.
The mayor added that the township had been “counseled that it is best for the state to take the lead on that action,” since that would give municipalities the best defense when dealing with the Internal Revenue Service (IRS).
Meanwhile, State Senator Joseph Pennacchio (R-26th Legislative District) introduced a bill last month in the State Senate to repeal New Jersey’s own long-standing cap on property tax deductions for state income tax purposes.
New Jersey has capped the deduction for property taxes for state income tax purposes at $10,000 for many years, preceding the new federal move that caps the state and local tax deduction also at $10,000.
Sen. Pennacchio’s bill, which is under review, would allow a taxpayer to deduct the total amount of his or her property taxes for state income tax purposes. It would apply to a taxpayer’s primary residence, but not to a vacation home.
In support of Sen. Pennacchio’s proposed bill, U.S. Rep. Leonard Lance (R-7th Congressional District) wrote to Gov. Murphy to seek the governor’s backing on the bill.
“I respectfully request your advocacy and support for [state] legislation that would eliminate New Jersey’s $10,000 cap on deductions for property taxes on taxpayers’ state income tax returns,” Rep. Lance wrote.
Pointing out that New Jersey has the highest property taxes in the United States, Rep. Lance wrote that capping state and local taxes to $10,000 at the federal level “negatively and disproportionately” affects New Jersey residents, compared to those of other states.
Repealing New Jersey’s own $10,000 cap on property tax deductions for state income tax filers “would alleviate some of that newly increased financial burden” imposed at the federal level, Rep. Lance wrote.