The money from Anchor property-tax relief benefits will not trigger higher income tax bills for homeowners receiving tax breaks worth as much as $1,750, according to the state Department of Treasury.
Whether the state-funded Anchor benefits will have to be reported as “income” on state tax returns is one of many Frequently Asked Questions both for homeowners and for renters addressed on the Department of Treasury’s website.
Other key FAQs about Anchor addressed online include how to confirm the information related to program eligibility, including meeting Anchor’s income limits, and how to obtain an application, for those who have not yet done so.
The next round of Anchor property-tax relief is going out soon to residents across New Jersey, according to Treasury. Many eligible homeowners and renters whose applications were automatically filed by the state should be receiving payments by the beginning of November. The first direct deposits will appear in Anchor recipients’ accounts as early as Thursday, officials said late Wednesday.
Thanks to a first round of benefits paid out earlier this year, some homeowners will be receiving $3,000 or more from the state through the Anchor program during the 2023 tax year.
Anchor payments not taxed by state
Treasury officials confirmed Wednesday that Anchor payments are not taxed by the state. The payments will also not be counted as a source of income for those applying for the popular Senior Freeze relief program, officials said.
Gov. Phil Murphy and lawmakers established the Anchor program last year as a successor to the longstanding Homestead Benefit.
Under Anchor — whose formal title is Affordable New Jersey Communities for Homeowners and Renters — benefits are paid by check or direct deposit, instead of the direct credit on property-tax bills that became a hallmark of the Homestead Benefit.
The first round of Anchor benefits was distributed to eligible homeowners and renters starting in spring 2023.
For eligible homeowners, the first round of benefits totaled up to $1,500, depending on annual income. Homeowners with incomes up to $150,000 in 2019 received a $1,500 benefit, and homeowners with incomes over $150,000 and up to $250,000 in 2019 received a $1,000 benefit.
Meanwhile, tenants received benefits totaling $450, if they earned $150,000 or less annually in 2019 through the inaugural round of Anchor benefits. Funding benefits for tenants is an acknowledgement of the property-tax burden they indirectly carry via monthly rents, officials have said.
Anchor round 2 boosts senior benefits
For the second round of benefits under Anchor, Murphy, a second-term Democrat, reached an agreement in late June with fellow Democrats who currently hold majorities in both houses of the Legislature to boost the benefits for senior homeowners and renters by $250.
As a result, homeowners ages 65 and older making up to $150,000 annually are now able to receive benefits totaling $1,750. For homeowners ages 65 and older making more than $150,000 and up to $250,000 annually, benefits now total $1,250. Renters ages 65 and older making up to $150,000 are now eligible to receive $700.
When Anchor debuted last year, all eligible homeowners and renters had to submit applications for benefits, with 2019 serving as the base year for both residency and income.
This time around, 2020 is the base year, and those who’ve previously applied for and received an Anchor benefit from the state had their application for the second round filed automatically.
Confirmation letters were distributed in August to those eligible for automatic enrollment and most payments are expected to be received by Nov. 1, according to Treasury officials.
Applications have also been distributed to other eligible homeowners and renters and they have until Dec. 29 to file their applications, with payments provided on a rolling basis within 90 days of filing, according to Treasury.
Avoiding bracket creep
Unlike a large number of other states, New Jersey does not annually adjust income-tax brackets, including to account for inflation. That leaves residents exposed to what’s known as “bracket creep,” which occurs when wage increases push taxpayers into a new tax bracket, even though they are no better off financially due to similar increases in inflation.
Had the state chosen to recognize Anchor payments as income, eligible residents could have seen their reportable state income increase by as much as $3,000 for the 2023 tax year, and by as much as $3,250 for eligible seniors.
Meanwhile, at the federal level, a leading state accountants group has also indicated Anchor benefits will not be subject to federal taxation.
Instead, Anchor payments will reduce the real-estate tax expense on federal returns, according to the New Jersey Society of Certified Public Accountants.
