NJ Tax Law Is $400M Boon For Biz Owners: Essex County Accountants

ESSEX COUNTY, NJ — Gov. Phil Murphy and state lawmakers may have just saved New Jersey business owners up to $400 million per year on their federal taxes, an Essex County-based accountant group says.

On Monday, Murphy signed the Pass-Through Business Alternative Income Tax Act into law, along with dozens of other bills. The legislation gives some Garden State business owners a way to bypass the $10,000 cap on state and local tax deductions (SALT) created under the Tax Cuts and Jobs Act.

Read the bill’s full text.

The law is expected to save qualifying Garden State business owners up to $400 million annually on their federal tax bills, the New Jersey Society of Certified Public Accountants (NJCPA) estimated.

“We’re grateful to the governor, the Legislature and all those who supported the bill,” the Roseland-based NJCPA stated. “Their dedication to assisting small businesses in New Jersey does not go unrecognized.”

• See related article: Gov. Murphy Vetoes Raising Property Taxes To Fix School Aid

The act, which unanimously passed the New Jersey legislature in December, affects “flow-through” businesses such as sub-S corporations, partnerships, LLCs or sole proprietorships.

In these types of businesses, the corporate income tax is paid by the owners and not at the corporate level. Certain business owners will be able to take the state income tax that they owe and pay it as business expenses, NJBiz reported.

The law was written as a response to the Tax Cuts and Jobs Act, which President Donald Trump signed in 2017. That tax law capped the federal income tax write-off for SALT at $10,000, but it kept an unlimited deduction for state and local business taxes, NJ Spotlight reported.

The Pass-Through Business Alternative Income Tax Act will apply to an estimated 115,000 small businesses that register as S corporations, as well as roughly 175,000 limited liability corporations, NJ Spotlight reported.

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