New Jersey’s low- and moderate-income workers are being encouraged to apply for a state-funded tax break that averages more than $825 per recipient.
With the April 15 tax filing deadline nearing, state officials are working to spread the word about New Jersey’s earned income tax credit, or EITC, including by using social media and a dedicated webpage.
Funded with more than $450 million annually out of the state budget, the tax credit is offered to working residents at least 18 years old who meet income qualifications. Depending on income and number of children, recipients can receive credits worth up to $2,972 annually, according to the Department of the Treasury.
Importantly, the EITC is a refundable credit, which means those who qualify will get a refund from the state even if their credit is larger than what they owe in taxes. It regularly draws praise from groups that advocate for low-income residents, including people of color, women and recent immigrants to the U.S.
Yet more than 200,000 New Jersey residents annually do not apply for the EITC, even though they are likely eligible to receive benefits, according to the latest Treasury estimates included in a news release issued earlier this year.
Check for eligibility
“As residents prepare to file their taxes, Treasury encourages taxpayers to check the Division of Taxation’s NJEITC webpage to determine if they are eligible and take advantage of the program,” the news release said.
New Jersey’s EITC was established more than two decades ago to piggyback on a federal tax-break program of the same name.
More on the earned income tax credit
The tax credit provided by the state is calculated as a percentage of what the federal government provides eligible recipients, and it can add up to thousands of dollars for some recipients on top of what they receive from the Internal Revenue Service.
‘Because people of color, women, and people who immigrated to the U.S. are overrepresented in low-paid work and in families with little to no earnings, these two state credits are an important tool for advancing equity.’ — from a report issued by the Center on Budget and Policy Priorities
The amount of an individual’s state and federal credits vary based on things that include annual income and whether a recipient has children. For the 2023 tax year, credits range from $240 up to $2,972, according to Treasury. The average state EITC for the 2023 tax year is estimated to be $826, Treasury officials said.
The EITC has had widespread support from both Democrats and Republicans in New Jersey, and Gov. Phil Murphy, a second-term Democrat, launched a phased-in expansion of the state credit in 2018 that recently brought it up to 40% of the federal credit.
Income qualifications
Murphy and lawmakers have also enacted legislation in recent years that has widened the group of workers who are eligible to receive the state EITC. Under that policy change, the minimum age of eligibility was lowered to 18 years old, and the upper age limit was also expanded to those 65 and older without dependents, according to Treasury.
Under income qualifications that are set by the federal government, residents who make up to $17,640 annually and who have no children are eligible to receive the credit for the 2023 tax year.
For those with children, the income limit is much higher; it rises to $56,838 for those with three or more children, according to the IRS.
And for married couples, annual income limits for the 2023 tax year range from $24,210 for couples with no children, to $63,398 for those with three or more children.
New Jersey is one of dozens of states that maintain a state-level EITC, and advocates have long argued the tax credit provides significant “bang for the buck,” including by helping lift families out of poverty and preventing them from drawing more costly public-assistance benefits.
Advancing equity
A report issued last year by the Washington, D.C.-based Center on Budget and Policy Priorities further emphasized the benefits of the EITC, especially when paired with a state-level child tax credit, which is something New Jersey also provides to income-qualified families through the tax code.
“Because people of color, women, and people who immigrated to the U.S. are overrepresented in low-paid work and in families with little to no earnings, these two state credits are an important tool for advancing equity,” according to the report.
“And by bolstering families’ incomes, they also boost local communities and state economies,” the report said.
A bill introduced earlier this year in the New Jersey Legislature calls for, among other changes, increasing the size of the state EITC to 45% of the federal credit, but it has yet to receive a hearing in either house, which are both controlled by Democrats.
