Every year, hundreds of thousands of low- and moderate-income workers in New Jersey are eligible to receive a state-funded tax credit that can be worth more than $3,000 for some recipients, depending on the size of their family.
Yet every year there are thousands eligible to receive this tax benefit — which is called the earned income tax credit, or EITC — that don’t end up claiming it, according to officials from the state Department of the Treasury.
As a new tax filing season is underway ahead of the April 15 deadline, Treasury officials are urging all residents to take the time to determine whether they are among the estimated more than 700,000 residents eligible for the EITC.
“New Jersey’s EITC is a vital resource that provides much needed support for many hardworking individuals and their families,” said state Treasurer Elizabeth Maher Muoio.
“Reducing tax burdens and increasing refunds puts money directly into the hands of those who need it most,” she said.
Valuable tax credit
The EITC is offered to working residents at least 18 years old who meet certain income qualifications. Depending on income, filing status and number of children, recipients can earn up to $66,819 and be eligible for credits worth as much as $3,132 for the 2024 tax year under current rules, according to Treasury.
New Jersey’s EITC was established more than two decades ago to piggyback on a federal tax-break program of the same name.
An estimated nearly 200,000 New Jersey residents annually do not apply for the state EITC, even though they are likely eligible to receive benefits, according to the latest Treasury estimates.
In all, more than two dozen states 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.
In New Jersey, the EITC has enjoyed widespread support from both Democrats and Republicans, and in recent years, Gov. Phil Murphy, a second-term Democrat, has worked with lawmakers to phase in an expansion of the state credit.
That’s come amid a broader focus on affordability issues in New Jersey, which has resulted in the establishment of a child tax credit and the reestablishment of state-funded property-tax rebates for renters, among other new policies.
Expanded eligibility
The current state budget has allocated more than $450 million to fund New Jersey’s EITC, which is worth 40% of the federal credit for the 2024 tax year.
That means, someone with a federal credit worth $4,000 would be eligible for a credit of $1,600 from the state, according to state Treasury officials.
Moreover, the state EITC is refundable, which means those who qualify will get a refund payment from the state even if their credit is larger than what they owe in taxes.
To claim the state EITC, you must file a ‘New Jersey Resident Income Tax’ return, even if your income is below New Jersey’s minimum filing threshold amount, Treasury officials said.
In addition to inflating the state EITC up to 40% of the federal credit, Murphy and lawmakers have enacted legislation in recent years that has widened the group of workers who are eligible to receive the state EITC.
That has resulted in the lowering of the minimum age of eligibility to 18, and the upper age limit was also expanded to those 65 and older without dependents, according to Treasury.
Still, an estimated nearly 200,000 New Jersey residents annually do not apply for the state EITC, even though they are likely eligible to receive benefits, according to the latest Treasury estimates.
This year, the federal government is recognizing the 50th anniversary of the EITC, which was first written into federal law in 1975.
By the numbers
According to the IRS, more than 540,000 tax filers in New Jersey claimed a federal EITC for the 2023 tax year, with the average federal credit totaling $2,628.
Under income qualifications that are set by the federal government, residents who make up to $18,591 annually and who have no children are eligible to receive the credit for the 2024 tax year.
For those with children, the income limit is much higher; it rises to $59,899 for those with three or more children, according to the IRS.
And for married couples filing income taxes jointly, annual income limits for the 2024 tax year range from $25,511 for couples with no children, to $66,819 for those with three or more children.
To claim the state EITC, you must file a “New Jersey Resident Income Tax” return, even if your income is below New Jersey’s minimum filing threshold amount, Treasury officials said.
For the 2024 tax year, eligible filers can receive their EITC from the federal government beginning in early March, according to the IRS. At the state level, Treasury officials didn’t immediately say when the first state credits can be collected.
More information about the state EITC, including the income limits and other eligibility rules, is available online at https://www.nj.gov/treasury/taxation/eitc/knoweitc.shtml.
More information about filing state income taxes, including forms and free tax preparation services, is available at https://www.nj.gov/treasury/taxation/individuals/freqqiti.shtml.
