New Jersey’s fiscal year 2021 budget

On September 29, New Jersey Governor Phil Murphy signed the state’s fiscal year 2021 budget which, as expected, contains important tax changes.

The budget includes a corporate business tax (“CBT”) surtax of 2.5% on corporations with income over $1 million, effective January 1, 2020.  For impacted corporations, this will raise the tax rate from 9% to 11.5%, giving New Jersey the distinction of having the highest corporate tax rate in the country. This surtax will be in effect for four years.

Mazars’ Insight

With increased CBT rates, it is more important than ever to understand New Jersey’s apportionment methodology in order to properly source receipts either into or out of the state. 

Also effective January 1, 2020, the individual tax rates will increase for those in the highest bracket.  Individuals with income in excess of $1,000,000, regardless of filing status, are taxed at a 10.75% rate, up from the previous 8.97% tax rate.  Prior to the fiscal year 2021 budget, this tax increase only applied to individuals with income of greater than $5,000,000.

Effective immediately, for the remainder of calendar-year 2020, employers must withhold income tax at the rate of 21.3% from wages, or other remuneration, greater than $1,000,000 and less than $5,000,000.  The purpose is to allow taxpayers to catch up on their withholdings, because the increased individual tax rate went into effect on January 1, 2020.

It is important to note that the New Jersey Division of Taxation will not impose interest or penalties for underestimating tax or withholding due on, or before, September 29, 2020, provided the shortfall is due to the new legislation.

Please contact your Mazars USA LLP professional for additional information.

Published on October 7, 2020

The information provided here is for general guidance only, and does not constitute the provision of tax advice, accounting services, investment advice, legal advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal or other competent advisers.