A2010

An Act providing a gross income tax deduction for the payment of certain residential mortgage interest, supplementing chapter 3 of Title 54A of the New Jersey Statutes.

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. a. A taxpayer shall be allowed to deduct from gross income amounts paid by the taxpayer during the taxable year for qualified mortgage interest.

b. A taxpayer determining tax pursuant to subsection a. of N.J.S.54A:2-1 shall be allowed to deduct from gross income amounts paid by the taxpayer during the taxable year for qualified mortgage interest on the first $700,000 of the taxpayer’s mortgage indebtedness. A taxpayer determining tax pursuant to subsection b. of N.J.S.54A:2-1 shall be allowed to deduct from gross income amounts paid by the taxpayer during the taxable year for qualified mortgage interest on the first $350,000 of the taxpayer’s mortgage indebtedness.

c. A taxpayer determining tax pursuant to subsection a. of N.J.S.54A:2-1 shall be allowed to deduct from gross income amounts paid by the taxpayer during the taxable year for qualified home equity loan interest on the first $100,000 of the taxpayer’s home equity loan indebtedness. A taxpayer determining tax pursuant to subsection b. of N.J.S.54A:2-1 shall be allowed to deduct from gross income amounts paid by the taxpayers during the taxable year for home equity loan interest on the first $50,000 of the taxpayer’s home equity loan indebtedness.

d. As used in this section:

“Principal residence” means a residential property in this State that is actually and continually occupied as the taxpayer’s permanent residence, as distinguished from a vacation home, property owned and rented or offered for rent by the homebuyer, and other secondary real property holdings.

“Qualified home equity interest” means interest which is paid during the taxable year on indebtedness secured by the acquisition of a home equity loan for a residential property that is the principal residence of the taxpayer.

“Qualified mortgage interest” means interest which is paid during the taxable year on indebtedness secured by the acquisition of mortgage insurance, or for the acquisition, construction, or substantial improvement, of a residential property that is the principal residence of the taxpayer.

2. This act shall take effect immediately and apply to taxable years beginning on or after January 1 next following the date of enactment.

STATEMENT

This bill provides a gross income tax deduction for payment of certain residential mortgage interest. Under the bill, a taxpayer may deduct from gross income amounts paid for qualified mortgage interest. Qualified mortgage interest means interest which is paid during the taxable year on indebtedness secured by the acquisition of mortgage insurance, or for the acquisition, construction, or substantial improvement, of a residential property in New Jersey that is the principal residence of the taxpayer.

A taxpayer may deduct from gross income amounts paid for qualified mortgage interest on the first $350,000 of the taxpayer’s mortgage indebtedness. Married individuals or civil union partners filing a joint return and individuals filing as head of household or as surviving spouse for federal income tax purposes may deduct from gross income amounts paid for qualified mortgage interest on the first $700,000 of the individual’s or individuals’ mortgage indebtedness

A taxpayer may deduct from gross income amounts paid for qualified home equity loan interest on the first $50,000 of the taxpayer’s home equity loan indebtedness. Married individuals or civil union partners filing a joint return and individuals filing as head of household or as surviving spouse for federal income tax purposes may deduct from gross income amounts paid for qualified home equity loan interest on the first $100,000 of the individual’s or individuals’ home equity loan indebtedness.

The purpose of this bill is to incentivize homeownership and to lessen financial strains on current homeowners.