LEGISLATIVE FISCAL ESTIMATE

SENATE, No. 1759

STATE OF NEW JERSEY

222nd LEGISLATURE

 

DATED: JUNE 2, 2026

 

 

SUMMARY

 

Synopsis:

Increases amount of rental payments defined as rent constituting property taxes for purposes of deduction from gross income for property tax payments; increases property tax credit option for certain individuals.

Type of Impact:

Annual State revenue loss to Property Tax Relief Fund.

Agencies Affected:

Department of the Treasury.

 

 

Office of Legislative Services Estimate

Fiscal Impact

FY 2027 and Each FY Thereafter

 

Annual State Revenue Loss

$127.2 million to $231.5 million

 

 

·       The Office of Legislative Services (OLS) estimates that this bill will reduce annual State revenues deposited into the Property Tax Relief Fund by approximately $127.2 million to $231.5 million by increasing the amount of rent constituting property taxes that certain taxpayers may deduct from taxable income under the gross income tax.

·       For the purposes of this analysis, the OLS estimates that roughly 1.1 million renter households will benefit from increasing the amount of rent constituting property taxes from 18 percent to 30 percent.

·       In lieu of claiming a deduction for rent constituting property taxes paid in a taxable year, current law allows certain taxpayers to claim a gross income tax credit of up to $50.  By increasing the maximum credit to $250, the OLS estimates that the bill will cause approximately 170,000 renters, with monthly rents below $1,000, to elect to claim the increased gross income tax credit instead of the deduction.

 

BILL DESCRIPTION

 

      This bill increases the percentage of rental payments defined as “rent constituting property taxes” from 18 percent to 30 percent for gross income tax deduction purposes and raises the gross income tax credit option from $50 to $250.  Currently, taxpayers can deduct up to $15,000 from gross income for property taxes or the rental equivalent paid by tenants, with tenants’ deductions based on the amount of rent constituting property taxes.  Eligible taxpayers may alternatively choose to claim a gross income tax credit, which this bill increases from $50 to $250.

 

 

FISCAL ANALYSIS

 

EXECUTIVE BRANCH

 

      None received.

 

OFFICE OF LEGISLATIVE SERVICES

 

      The OLS estimates that this legislation would reduce annual State revenues deposited into the Property Tax Relief Fund by approximately $127.2 million to $231.5 million by increasing the amount of rent constituting property taxes that certain taxpayers may deduct from taxable income under the gross income tax.

      This estimate is based on data published by the United States Census Bureau in the 2024 American Community Survey, which indicates there are approximately 1.28 million renter occupied housing units in New Jersey.  Based on gross rent data from the same survey, the OLS estimates that renters deduct roughly $5.2 billion in rent as property taxes paid.  Under the proposed 30 percent formula, the amount of rent deductible would increase to approximately $8.8 billion, representing an increase of $3.6 billion.

      The OLS assumes that renters with monthly payments under $1,000, or approximately 170,000 households, would elect to take the increased $250 credit rather than the deduction, as this would be expected to provide a greater tax benefit given their circumstances.  For renters paying $1,000 or more monthly, or approximately 1.1 million households, the OLS assumes these taxpayers would benefit more from the increased deduction amount.

      The range in the revenue loss estimate reflects different assumptions about the income distribution of renters and their corresponding tax rates.  The OLS applied marginal tax rates ranging from 3.5 percent to 6.37 percent to the increased deduction amounts, with higher-rent households generally falling into higher marginal tax brackets.  The calculation of the total fiscal impact considers both the revenue loss from the increased deduction percentage and the shift of lower-rent households to the increased credit option.

 

 

Section:

Revenue, Finance, and Appropriations

Analyst:

Patrick Walsh

Associate Fiscal Analyst

Approved:

Thomas Koenig

Legislative Budget and Finance Officer

 

 

This legislative fiscal estimate has been produced by the Office of Legislative Services due to the failure of the Executive Branch to respond to our request for a fiscal note.

 

This fiscal estimate has been prepared pursuant to P.L.1980, c.67 (C.52:13B-6 et seq.).