Sponsored by:
Senator M. TERESA RUIZ
District 29 (Essex)
Senator TROY SINGLETON
District 7 (Burlington)
Co-Sponsored by:
Senator Turner
SYNOPSIS
Allows gross income tax credit for certain child and dependent care expenses.
CURRENT VERSION OF TEXT
As introduced.
An Act allowing a credit against gross income tax for certain child and dependent care expenses and supplementing 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 with New Jersey taxable income of $60,000 or less who is allowed a credit for expenses for household and dependent care services for federal income tax purposes pursuant to section 21 of the federal Internal Revenue Code (26 U.S.C. s.21) shall be allowed a credit against the tax otherwise due pursuant to the “New Jersey Gross Income Tax Act,” N.J.S.54A:1-1 et seq., in an amount equal to a percentage of the credit allowed the taxpayer for federal income tax purposes for the taxable year, according to the following schedule:
NJ taxable income is: Amount of NJ credit is:
Not over $20,000 50% of federal credit
over $20,000 but not over $30,000 40% of federal credit
over $30,000 but not over $40,000 30% of federal credit
over $40,000 but not over $50,000 20% of federal credit
over $50,000 but not over $60,000 10% of federal credit.
Provided however, the credit allowed by this section for a taxable year shall not exceed $500 for employment-related expenses paid by the taxpayer for one qualifying individual and $1,000 for employment-related expenses paid by the taxpayer for two or more qualifying individuals.
b. A credit allowed pursuant to this section shall not reduce the tax liability otherwise due pursuant to N.J.S.54A:1-1 et seq. for a taxable year to an amount less than zero.
c. Married couples shall file a joint return in order to claim the credit provided by this section.
2. This act shall take effect immediately and shall apply to taxable years beginning on or after the January 1 next following the date of enactment.
STATEMENT
This bill provides a nonrefundable credit against the New Jersey gross income tax for certain expenses paid for the care of a child or dependent when necessary for the taxpayer’s employment. The credit is available to taxpayers who are allowed the federal child and dependent care credit and have New Jersey taxable income of $60,000 or less for the taxable year.
The amount of the credit provided by this bill is a specific percentage of the taxpayer’s federal child and dependent care credit and varies according to the amount of taxpayer’s New Jersey taxable income as follows:
NJ taxable income is: Amount of NJ credit is:
Not over $20,000 50% of federal credit
over $20,000 but not over $30,000 40% of federal credit
over $30,000 but not over $40,000 30% of federal credit
over $40,000 but not over $50,000 20% of federal credit
over $50,000 but not over $60,000 10% of federal credit.
The credit is capped at a maximum of $500 for expenses paid for one qualifying individual, and $1,000 for expenses paid for two or more qualifying individuals, per taxable year. Married couples must file jointly in order to claim the credit.
The amount of the credit established by this bill is linked to the amount of the taxpayer’s federal child and dependent care credit. The provisions of section 21 of the federal Internal Revenue Code define employment-related expenses and qualifying individual, and establish dollar limits on creditable expenses, among other things which will apply for the purposes of the State credit established by this bill.
The purpose of the credit is to assist working taxpayers that incur expenses for child or dependent care services, which are often substantial.