Income Tax Season 2021: What To Know Before Filing In New Jersey

Hoboken NJ

21 February, 2021

7:58 AM

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NEW JERSEY — The 2021 tax season in New Jersey is well underway, as filers gather their W-2s and other documents for their returns for the 2020 tax year. In the first tax year since the coronavirus began to affect life and work in the United States, millions of Americans are filing returns that look quite different from in years past. Here are seven things to know about this tax season in New Jersey: Do The Stimulus Payments Count? No, the two federal economic relief bill payments sent to all Americans in 2020 should not be included in your gross income, the Internal Revenue Service has stated. Do not include it on your taxable income. It will not reduce your refund or affect your eligibility for federal government assistance or benefit programs, according to the IRS. How About Unemployment Benefits? Yes, those count. As the pandemic forced the United States unemployment rate to skyrocket to an unprecedented 14.7 percent by April, more people than ever must report unemployment income during this tax season. While the unemployment benefits are taxable, they are not considered "earned" income and won't be used against you in determining whether you are eligible for the Earned Income Tax Credit, Jackson-Hewitt points out. Generally, states do not withhold taxes on unemployment benefits. Job-hunting expenses are no longer deductible, according to Jackson-Hewitt. Specific Changes In New Jersey: Marijuana law: In November 2020, New Jersey voters approved Public Question 1, a legislatively referred constitutional amendment that legalizes recreational marijuana as of January 1. The ballot measure specifies that the general sales tax will apply to marijuana sales, and local option sales taxes of up to 2 percent may also be collected. The measure prohibits the imposition of excise taxes on marijuana purchases at the retail level but does not prohibit further taxes from being adopted at the wholesale or manufacturer levels. The House and Senate have both passed legislation that would impose an additional "excise fee," as well as a gross receipts tax (GRT) style "local transfer tax" on cannabis products. As of this writing, Gov. Phil Murphy (D) has not acted on this bill.Corporate income: On Sept. 29, 2020, Gov. Murphy signed legislation retroactively increasing and extending New Jersey's surtax on corporate taxable income exceeding $1 million. The surtax was adopted in 2018 at a rate of 2.5 percent but was on track to phase down to 1.5 percent for 2020 and 2021 and to sunset by 2022. Instead, A. 4721, which took effect immediately upon its enactment, retroactively increased the rate back up to 2.5 percent for tax years 2020 through 2023. As a result, New Jersey's top corporate income tax rate, which would have been 10.5 percent for 2020 and 2021, is now 11.5 percent for 2020 through 2023. Do I Qualify For Earned Income Tax Credit? The earned income tax credit exists to help middle- to low-income individuals and families reduce the amount of taxes they pay and can help them get more in refunds, according to the IRS. The IRS has an online tool to see if you qualify for the credit. Standard Deduction Changes: The standard deduction is a dollar amount that reduces the amount of income on which you are taxed and varies according to your filing status. The standard deduction for each filing status for the 2020 tax year has changed slightly from 2019, according to the IRS: Single or married filing separately: $12,400 — Up from $12,200 for 2019. Married filing jointly or qualifying widow: $24,800 — Up from $24,400 for 2019. Head of household: $18,650 — Up from $18,350 for 2019. Congress passed major tax legislation in 2017. The bill signed by President Donald Trump that year kept the seven tax brackets but lowered the number of the tax rates. Additionally, it changed the income thresholds at which the rates apply. New tax rates These new rates went into effect for the 2018 tax year and have remained since. Here's a reminder for the 2020 tax year: Tax Brackets And Thresholds For Single Filers In 2020 Tax Year Tax Rate — Taxable Income Bracket 10 percent — $0 to $9,52512 percent — $9,526 to $38,70022 percent — $38,701 to $82,50024 percent — $82,501 to $157,50032 percent — $157,501 to $200,00035 percent — $416,701 to $418,40037 percent — More than $500,000 Tax Brackets And Thresholds For Married Couples Filing Jointly in 2020 Tax Year Tax Rate — Taxable Income Bracket 10 percent — $0 to $19,05012 percent — $19,051 to $77,40022 percent — $77,401 to $165,00024 percent — $165,001 to $315,00032 percent — $315,001 to $400,00035 percent — $400,001 to $600,00037 percent — More than $600,001 When Is Tax Day This Year? Tax day is back to the traditional April 15. The deadline was extended for three months a year ago due to the then-new coronavirus pandemic. April 15 falls on a Thursday in 2021. Before the pandemic, the only reason Tax Day would be delayed is if April 15 fell on a weekend or local holiday in Washington, D.C. Got news? Email [email protected]. Got photos? Please include express written permission from the photographer for us to use them. To be the first to get free news alerts with breaking stories in your town, or to get a free local newsletter each morning, sign up for Patch breaking news alerts or daily newsletters.