If you are a resident of the Garden State, it’s easy to feel compelled to complain about New Jersey property taxes. Never fear! In this blog we’re going to cover all the basics – what the tax rates are for people who own property in NJ, how they vary by county, a little bit of history, and what you can do if you are choking over your most recent tax bill.
We are a financial advisor in Morristown, NJ, providing financial advice for New Jersey residents as well as folks across the country. Before we get started, you may want to check out other New Jersey finance blogs we’ve written:
A checklist for moving to Morristown, NJ from NYC
What is the average income in New Jersey?
What is the New Jersey 529 Plan and should I use it to send my kids to college?
Should you buy a New Jersey vacation home?
40 questions to ask a financial advisor in New Jersey
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What are New Jersey property tax rates?
What are New Jersey property tax rates?
We have the specific statistics – will share those later on – but first it’s important to understand how the tax rate is determined.
What is new Jersey property tax, anyways? What does it consist of? What is it based upon?
According to the New Jersey State League of Municipalities, there are six factors that determine what you pay in property tax in New Jersey.
- Your property’s assessed market value (calculated each January)
- What it is costing the municipality and county for provide programs and services to your community
- Local public-school expenses
- The other revenues that the municipality and county can draw on to “pay their bills”
- How much tax-exempt property lies within your municipality
- The collective value of all taxable properties within your municipality
The idea behind property tax is that the larger your property, the higher the amount of community resources it will consume – and the tax is to compensate for that.
New Jersey property taxes do tend to be high compared to the rest of the country:
- New Jersey income levels are high with, on average, residents out-earning residents of other states by about $15k a year.
- The New Jersey home ownership rate is high, and housing is expensive
- Taxes in New Jersey are high
Overall, it’s pretty expensive to live in New Jersey. On the flip side, the benefits of living in New Jersey are significant – high quality healthcare, education, and access to public transportation, to name a few.
Is property tax high where I live?
You would think that the higher income counties within New Jersey are where residents pay higher property tax.
Au contraire, mon frere!
Think of it as a matter of tax rate (in percentage terms) vs. tax bill amount (in dollars).
Remember we were talking about how property tax rates are determined? As mentioned, the financial conditions of the place where your property is located has an influence over its ability to pay its bills.
If your county is strapped for cash – guess what – property owners are one of the sources they look to tap.
For this reason, the lower income areas within New Jersey tend to have a higher property tax rate. That is because the municipality has to take a “bigger bite” charging higher property tax to residents of lower income areas in New Jersey, presumably where home values are lower, in order to get what it needs to pay the bills (and pay the firefighters, police, teachers, etc.)
According to New Jersey Future, “Among the 50 municipalities with the lowest median household incomes…the median tax rate is 3.185%, substantially higher than the median of 2.523 percent over the rest of the state’s municipalities” (2021).
To find information specific to where you own property, please refer to this table of average property tax rates and tax bills for each New Jersey County.
Not the kind of surprise you were looking for?
Higher-than-expected New Jersey property taxes are a problem – especially if they are coming as a big surprise. As you can see from the section above, the amount of tax you pay is dependent on so many factors that it’s impossible to predict with clarity what they will be in any given year. You can try to estimate them with a New Jersey property tax calculator, but there’s no guarantee it’ll be accurate.
How do you cope with this tax uncertainty?
For these reasons, it’s important to put a solid financial plan in place that will help prevent you being caught flat-footed in case these “surprises” occur. If you can’t pay your property taxes, your home could be taken from you. Having adequate reserves for surprises such as these is of high importance if you are on a fixed income – such as senior citizens or retired folks. If you are retiring in New Jersey, be sure to check out what we have to say about it. Property taxes, for Garden State residents, is only one of many variables you’ll need to keep track of.
What to do if you’re feeling the pain
Putting from financial planning aside, you may be wondering how to escape from a burdensome property tax bill.
Help is on the way!
Here are the ways you can see property tax relief in the state of New Jersey.
- If you believe your property’s value was improperly estimated during New Jersey’s property tax assessment process, you may appeal it.
- You may be eligible for Homestead Benefits. This is a form of property tax relief for New Jersey homeowners.
- You are able to deduct the lesser of $15,000 or the amount of taxes paid after the year 2018, under the New Jersey property tax deduction program. This may result in a reduction of your taxable income, which may in turn decrease the amount of income tax you pay. Alternatively, you may also be eligible for a New Jersey property tax credit in the amount of $50.
- Senior citizens and disabled people meeting certain qualifications may be reimbursed for increases in their property tax under the New Jersey Property Tax Senior Freeze program. Note: this does not actually “freeze” your taxes, it pays you back for a portion of them.
- Municipalities offer New Jersey property tax deductions, exemptions, and abatements that may apply.
Wrapping it up on New Jersey property tax
We hope you’ve enjoyed our blog on New Jersey property taxes.
We are financial advisors in Morristown, NJ serving the local community and beyond. If you have questions about retiring in New Jersey, moving there, affording to live there, or (like us) are just plain old Bruce Springsteen fans, reach out and send us a message.
Evans, Tim. (2021, February 15th). New Jersey Future blog. Where Do New Jersey’s Property Tax Bills Hit the Hardest? https://www.njfuture.org/2021/02/15/where-do-new-jerseys-property-tax-bills-hit-the-hardest/
Joe Shimkus. 2021 New Jersey Property Tax Rates, Average Tax Bills, and Assessed Home Values. (11 July, 2022). https://joeshimkus.com/NJ-Tax-Rates.aspx
New Jersey State League of Municipalities. Property Tax in New Jersey. https://www.njlm.org/198/Property-Tax-in-New-Jersey
Official Site of the State of New Jersey. Division of Taxation. NJ Income Tax Property Tax Deduction/Credit for Homeowners and Tenants. https://www.state.nj.us/treasury/taxation/njit35.shtml
Official Site of the State of New Jersey. Division of Taxation. Senior Freeze (Property Tax Reimbursement). https://www.state.nj.us/treasury/taxation/ptr/
Official Site of the State of New Jersey. Division of Taxation. Homestead Benefit Program. https://www.state.nj.us/treasury/taxation/homestead/geninf.shtml
Official Site of the State of New Jersey. Division of Taxation. Deductions, Exemptions, and Abatements https://www.state.nj.us/treasury/taxation/lpt/lpt-deductions.shtml
Official Site of the State of New Jersey. Division of Taxation. Appeal My Property’s Assessment. https://www.state.nj.us/treasury/taxation/lpt/lpt-appeal.shtml