S1544

An Act concerning the gross income tax credit for child or dependent care expenses, amending P.L.2018, c.45.

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

1. Section 5 of P.L.2018, c.45 (C.54A:4-17) is amended to read as follows:

5. a. A resident taxpayer with New Jersey taxable income of [$60,000] $150,000 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 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. The credit shall be 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.]

Not over $50,000 50% of federal credit

over $50,000 but not over $75,000 40% of federal credit

over $75,000 but not over $100,000 30% of federal credit

over $100,000 but not over $125,000 20% of federal credit

over $125,000 but not over $150,000 10% of federal credit.

The credit allowed by this section for a taxable year shall not exceed [$500] $1,000 for employment-related expenses paid by the taxpayer for one qualifying individual and [$1,000] $2,000 for employment-related expenses paid by the taxpayer for two or more qualifying individuals. The [$60,000] $150,000 income limit set forth in this subsection shall apply to taxpayers of any filing status.

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. A taxpayer eligible to receive a credit pursuant to paragraph (3) or (4) of subsection (e) of section 21 of the federal Internal Revenue Code (26 U.S.C. s.21) shall be eligible for the credit provided by this section, provided the taxpayer satisfies the income limit set forth in subsection a. of this section.

d. In the case of a part-year resident claimant, the amount of the credit allowed pursuant to this section shall be pro-rated, based upon that proportion which the total number of months of the claimant's residency in the taxable year bears to 12 in that period. For this purpose, 15 days or more shall constitute a month.

(cf: P.L.2018, c.45, s.5)

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

STATEMENT

This bill expands eligibility for the credit against the New Jersey gross income tax for employment-related expenses incurred while caring for a child or dependent. Currently, the credit is available to resident 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 bill raises the $60,000 income limit to $150,000.

The bill also increases the amount of the State credit available to taxpayers by expanding qualifying income brackets. For example, under current law, the State credit a taxpayer with income less than $20,000 receives is equal to 50 percent of their federal credit. The bill increases the $20,000 income limit to $50,000, and all other brackets have also been expanded to allow more taxpayers to qualify for enhanced benefits.

In addition, the bill increases the maximum credit allowed for a taxable year to $1,000 for employment-related expenses paid by the taxpayer for one qualifying individual and $2,000 for employment-related expenses paid by the taxpayer for two or more qualifying individuals. Under current law, the maximum credit allowed is $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.