What are the Income Law Requirements in the State of New Jersey?
Tax is the compulsory contribution to the revenue levied by the government. It is charged on the income of the person, business profits or added to the cost of goods and services, and financial transactions. There are three types of taxes namely the proportional tax, the progressive tax, and the regressive tax.
Regardless of the income, the proportional tax imposes the same percentage of tax on everyone. The progressive tax imposes a higher percentage of tax on high income, and regressive tax imposes a higher percentage rate of tax on low income. Tax helps the state to provide essentials services that the residents need and to maintain order.
New Jersey Division of taxation
New Jersey is a state in the northeastern part of the US. It is the fourth smallest state and the most densely populated among the 50 states in the U.S. The tax revenues are governed by Division of Taxation in New Jersey. In the state of New Jersey, the tax is collected in a variety of ways by federal, state and the local government. The Division of Taxation is committed to stopping tax and identity fraud to ensure that the New Jersey tax system is fair and honest.
The New Jersey state revenues comprise of the following:
Income tax in New Jersey
Income tax is the tax levied directly on a person’s income. The person may be an individual, partnership, association, estates, trusts, residents, and nonresidents. Partnership and associations are not taxed in New Jersey, but local taxes may apply. The remaining persons are taxed on gross income and have to file for returns. Nonresidents are taxed on the income earned in New Jersey. New Jersey follows progressive income tax rates.
Property tax in New Jersey
Property tax is an ad valorem tax on the value of the property levied by the governing entity of the jurisdiction where the property is located. New Jersey homeowners pay the highest property tax compared to any state in the U.S. Rates are more than double the national average in some areas. The local government collects the property tax. An assessor determines the value of the property annually. The amount of tax depends on the market value of the property owned and the tax rates among the local tax authorities.
Sales tax in New Jersey
New Jersey does not allow the imposition of local sales tax. The entire state has a single tax rate. The revenue generated is deposited into the state treasury. Sales tax is not levied upon unprepared food, medicine, clothing, and household paper products. But, fur clothing and medical cannabis are taxed. In New Jersey, gasoline is not subject to sales tax, but excise tax applies whereas cigarettes are subject to both, sales and excise taxes.
Corporation business tax in New Jersey
The franchise tax is imposed for doing business, maintaining an office, employing or owning capital or property, engaging in contracts, or deriving receipts in New Jersey. The tax applies to domestic and foreign corporations, joint-stock companies, limited partnership associations, business trust, and banks. Some cooperative associations and corporations like railroad, sewerage, and water, municipal electric corporations and non-profit cemetery corporations are exempt from this tax.
Principles of taxation in New Jersey
The first principle of taxation states that those who benefit from the services should be the one to pay for it. The tax paid should be in proportion to the service benefit received. The limitation of this principle is that government services provide welfare to those who can least afford to pay for it. The other limitation is that benefits cannot be measured. The second principle states that people should be taxed according to their ability to pay, irrespective of the services they receive. This principle assumes that people with higher income suffer less discomfort while paying taxes.
It is always better to have an in-depth knowledge of the tax law of the state you reside in, before filing for returns.