Montgomery Township taxpayers, already reeling under recent changes in federal tax law capping state and local tax deductions to $10,000 for federal income tax purposes, may be offered some relief at the state level.
Gov. Phil Murphy suggested a plan last week that would allow property owners statewide to make an end run around the $10,000 cap by making voluntary contributions to charitable funds set up for municipalities and school districts.
The mayors of several New Jersey towns have already pledged to introduce the charitable contribution plan in their towns, allowing taxpayers to make voluntary contributions to funds that would use the money to pay for local services, such as schools, law enforcement and infrastructure.
Setting up a charitable fund would allow property owners to claim the contribution as a charitable deduction, reducing their federal tax bill. The Internal Revenue Service allows taxpayers to "write off" or deduct the money they give to charities.
Gov. Murphy said he had begun working with state lawmakers to protect New Jersey taxpayers, adding that "we must eliminate any and all barriers to creating a system that will provide tax relief to property taxpayers who make charitable contributions to their municipality."
Montgomery Township officials are trying to find every opportunity to alleviate the added tax burden, Mayor Mark Conforti said. The governor's suggestion to create a charitable fund is an option, he said.
"It is way too early to dismiss any option and I want to make sure whatever we do - a charitable foundation or another solution - is legal," Mayor Conforti said.
"The key is, it has to pass muster with the Internal Revenue Service. I don't want to do this twice. We have to get it right the first time," Mayor Conforti said.
Meanwhile, state Sen. Joseph Pennacchio (R-26th) introduced a bill in the Senate last month that would drop New Jersey's own long-standing cap on property tax deductions for state income tax purposes.
New Jersey capped the deduction for property taxes - for state income tax purposes - at $10,000 many years ago. It preceded the new federal move that caps the state and local tax deduction (also $10,000).
Sen. Pennacchio's bill, which is under review, would allow taxpayers to deduct the total amount of their property taxes for state income tax purposes. It would apply to a taxpayer's primary residence, but not to a vacation home.
U.S. Rep. Leonard Lance (R-7th Congressional District) wrote to Gov. Murphy to seek the governor's backing on that bill in a Feb. 8 letter to the governor.
"I respectfully request your advocacy and support for (state) legislation that would eliminate New Jersey's $10,000 cap on deductions for property taxes on taxpayers' state income tax returns," Rep. Lance wrote.
New Jersey has the highest property taxes in the United States, Rep. Lance wrote, and capping state and local tax deductions to $10,000 at the federal level "negatively and dispropportionately" affects New Jersey residents, compared to those of other states.
Repealing New Jersey's own $10,000 cap on property tax deductions for state income tax filers "would alleviate some of that newly increased financial burden" imposed at the federal level, Rep. Lance wrote.