New Jersey Property Tax

New Jersey receives our rank as the highest paying property tax state, an honor I am certain residents are not happy about.

New Jersey's real property tax is an "ad valorem tax," or a tax according to value. All real property is assessed according to the same standard of value except for qualified agricultural or horticultural land. The standard measure of property value is "true value" or market value, that is, what a willing, knowledgeable buyer would pay a willing, knowledgeable seller on the open market at a bona fide sale as of the statutory October 1 pretax year assessment date. The value of qualified farmland is based upon its productive capabilities when devoted to agricultural or horticultural uses. Property shall be assessed under general law and by uniform rules.

Real property is required to be assessed at some percentage of true value established by the county board of taxation in each county. All 21 counties in New Jersey have chosen 100%.

New Jersey's equalization program is designed to ensure that each taxing district, as a whole, is treated equitably. Equalized valuations are used to apportion among taxing districts within a county the costs of county government; as a component of the formula used for the distribution of school aid; and for the distribution of costs of school districts covering more than one municipality. The principal part of the work of equalization lies in determining the aggregate true value of all real estate in each of the state's 566 taxing districts. This figure is established by a program of assessment- sales ratio analysis. Procedures of sales data collection and analysis have been developed by the Property Administration Branch of the Division of Taxation but the success of the process requires the cooperation of every county board of taxation and every local tax assessor.

County, municipal and school budget costs determine the amount of property tax to be paid. A town's general tax rate is calculated by dividing the total dollar amount it needs to raise to meet local budget expenses by the total assessed value of all its taxable property. An individual's property taxes are then calculated by multiplying that general tax rate by the assessed value of his particular property. Because of New Jersey's strong "home rule" concept of government, the State does not participate in the making of local budgets, nor does it receive any of the property taxes collected.

Property tax payments are due annually in four installments, February 1, May 1, August 1 and November 1.

The Homestead Credit/Rebate Program provides credits or rebates for homeowners and tenants who occupied their principal residence in New Jersey on October 1, paid property taxes on that dwelling either directly or through rent, and whose gross income for the entire year does not exceed certain limits.

Only New Jersey residents who were either homeowners or tenants on October 1, 2007, are eligible for a 2007 homestead credit or rebate. Homeowners and tenants file different applications according to their status on October 1:

Tenant: If you were a tenant on October 1, 2007, file a Form TR-1040, tenant homestead rebate application, contained in the 2007 resident income tax return booklet.

Homeowner: If you were a homeowner on October 1, 2007, a 2007 homestead rebate application will be mailed to you. Homeowners do not file Form TR-1040, doing so will delay the payment of your homestead credit or rebate. More information for homeowners.

If you were neither a homeowner nor a tenant on October 1, 2008, you are not eligible for a 2008 homestead credit or rebate, even if you owned a home or rented a qualified dwelling for part of the year.

Eligible homeowners and tenants who pay property taxes, either directly or through rent, on their principal residence in New Jersey are eligible for either a deduction or a refundable credit on their New Jersey resident income tax return. Homeowners and tenants may be eligible for a deduction or credit even if they are not eligible for a homestead rebate. Qualified residents may deduct 100% of their property taxes due and paid or $10,000, whichever is less. For tenants, 18% of rent paid during the year is considered property  taxes paid. The minimum benefit is a refundable credit of $50.