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Quirky and Convoluted: Business as Usual for State’s Homestead Tax Relief

Residents looking to popular program for pain relief from high taxes on their homes may want to skip the fine print and get to the bottom line — applications must be submitted by November 30

spiral staircase

Once again, the state has hit on a convoluted scheme for administering its popular Homestead property-tax relief program — and the application deadline is just a few days away. The thousands of New Jersey homeowners who count on Homestead to help offset their property taxes will file one application for payments made in 2016, but their credits and rebates will be issued in two semi-annual disbursements next year.

Homeowners left scratching their heads over the cumbersome procedure need to keep one thing in mind: Their applications must be submitted to the state Division of Taxation by November 30 (by mail or online).

The new payment schedule is a byproduct of this year’s budget process and the last-ditch effort to correct a funding snafu that occurred during former Gov. Chris Christie’s last year in office. That muddle threatened to shortchange thousands of seniors and other New Jersey homeowners.

But the fix enacted by Gov. Phil Murphy and lawmakers has resulted in yet another procedural quirk for the longstanding tax-relief program.

Counting on Homestead for help

In all, more than 600,000 New Jersey homeowners benefit each year from the Homestead program, which provides direct credits and, in some cases, rebates to take some of the sting out of the state’s notoriously high property-tax bills, which averaged nearly $8,700 last year. Senior citizens and disabled homeowners making up to $150,000 annually qualify for the largest Homestead credits, which average $518. Those who make up to $75,000 annually qualify for credits that average $404. (There is no benefit for tenants under a program change that was enacted by Christie).

Despite the Homestead program’s popularity — and the aversion many New Jersey residents have for their high property-tax bills — the funding for the program has been a frequent target for governors from both parties as they’ve dealt with the state’s notorious budget problems over the years.

For example, former Democratic Gov. Jon Corzine started a cost-saving practice of maintaining 2006 as the baseline year to calculate the annual credits, something that other governors and lawmakers have been repeating ever since. Thus, instead of keeping pace with rising property-tax bills, Homestead credits are still calculated as a percentage of their 2006 bills.

Adding to the confusion, Christie, a two-term Republican, delayed the state’s payment of Homestead credits on several occasions to ease his own budget shortfalls, creating a long lag in the program. That’s left the credits that were paid out by the state this year as an offset for property tax bills that were paid by homeowners in 2015.

Double trouble

This year’s Homestead credits also had to be paid out in two installments, in May and November, because the 2017 budget battle between Christie and Democratic legislative leaders resulted in the nearly $300 million line item for the Homestead program being cut in half for fiscal year 2018. That left Homestead recipients who were used to getting their full credits paid out every May with only half of what they were expecting to receive that month.

The original budget proposal that Murphy, a first-term Democrat, put forward for fiscal 2019 would have maintained the reduced funding for the Homestead program, but legislative leaders tacked on an additional $154.7 million for the program in the budget legislation they sent to Murphy in late June. That funding was left in the final version of the fiscal 2019 appropriations act. Other language called for a second Homestead credit to be provided this year on bills that were due by November 1 to ensure no recipients were shortchanged.

Not enough left for full credit

But now there’s only enough funding left in the budget to pay out another partial round of credits in May 2019. A second round of Homestead credits would be paid out later in the year as they were this year “contingent of course on continued funding in the next budget,” said Jennifer Sciortino, a spokeswoman for the Department of Treasury.

Assembly Speaker Craig Coughlin, who led this year’s efforts in the Legislature to restore the full Homestead funding, said he will look to keep funding for the program at least at the current levels during next year’s budget talks, which would ensure a second round of credits are funded.

“Making the state more affordable is my top priority,” said Coughlin (D-Middlesex). “I intend to fight for homeowners to secure at least the same amount of funding for Homestead credits in the State’s FY 2020 budget.”

But no matter what happens with the next budget, applications for the next round of Homestead credits are now due from homeowners by November 30. The state mailed out applications to likely recipients earlier this year, but homeowners can also file an application online.

To be eligible for a Homestead credit, a homeowner must be a New Jersey resident who occupied their home as of October 1, 2016, and also paid their full property tax bill that year. Married couples and those in civil unions are required to share information about their spouse or partner unless they lived in separate principal residents in 2016. Residents who are uncertain whether they meet the program’s income requirements are still encouraged to file an application with the state to ensure they don’t miss out.

For more information, homeowners can visit the Division of Taxation's website or call 1-888-238-1233.

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