On June 30, 2026, the New Jersey State Assembly passed the Garden State’s 2026-2027 budget and sent it to Gov. Mikie Sherrill who is expected to sign it into law. Several tax bills are part of the overall budget package:
Child Tax Credit Increase (S4351)
The bill increases the maximum child tax credit from $1,000 to $1,250 for taxpayers with incomes of less than $30,000. Increases in the credit for taxpayers with higher incomes up to $80,000 are also part of the bill. The credit increase will apply for tax years 2026-2028.
Property Tax Relief Denied for Higher Income Earners (A5327)
The “Stay NJ” property tax relief program, first enacted in 2023, provides property tax rebates of up to $6,500 for seniors who maintain their principal residence in New Jersey. In past years, seniors with up to $500,000 in income were eligible for property tax rebates, but the programs benefits have been modified to apply only to those with incomes of less than $200,000. This provision will take effect July 1, 2026.
Employer Fee for Employees Receiving Medicaid Benefits (A5324)
Effective July 1, 2026, employers with 50 or more employees will be subject to fees ranging from $325 to $725 per employee for each employee who receives health benefits coverage through the state’s Medicaid program.
Elimination of Data Center Tax Credit Program (A5165)
In 2020, New Jersey enacted several business tax credit programs including the “Next New Jersey Program” which provides up to $500 million in tax credits for projects related to the development of artificial intelligence data centers in the state. To date, program has awarded $250 million in credits. The legislation eliminates the program going forward.
Corporate Net Operating Loss Deduction Limited (A5322)
Currently, corporations doing business in New Jersey can use net operating losses from previous years to offset up to 100% of their New Jersey taxable income. For tax years ending on and after July 31, 2026, corporations will be limited to an overall net operating loss deduction of $1 million. This provision is currently scheduled to expire for tax years ending on and after July 31, 2030.
New Jersey NOL’s have a lifespan of 20 years. The legislation provides that where usage of an NOL between 2026-2030 is limited due to the new $1 million cap, an additional six years is added to the useful lifetime of the NOL.
Corporations who are subject to the new limit on deductions for NOL’s are provided with relief from penalties for failure to make estimated tax payments due during 2026.
Individual Business Loss Deductions Further Restricted (A5323)
Individual taxpayers who incur losses from rental activities, proprietorships, partnerships, and/or S corporations may carry their losses from those activities forward and use them to offset up to 50% of business income in future years.
Beginning with tax year 2026, individuals whose gross income exceeds $500,000 will be permitted to offset only 25% of their business income with loss carryovers from previous years. Where a taxpayer has gross income of more than $1 million, no loss deduction is permitted.
OBBBA Decoupling Not Addressed
The budget bill does not decouple from two of the several business income tax provisions brought about by last year’s One Big Beautiful Bill Act. Accordingly, unless the state assembly enacts special legislation, New Jersey will follow the new federal deductions for domestic research & experimental costs and the new calculation of interest deduction limits under section 163(j) of the federal tax code.
Note that previously existing decoupling legislation (N.J.S.A. §54:10A-4(k)(12)(A) and N.J.S.A. §54A:5-1.2(a)(1)) already denies corporations and individuals the 100% depreciation deduction for qualified production property, 100% bonus depreciation, and section 179 expensing in excess of $25,000.
Should you have any questions about how any of the above tax provisions affect you or your business in New Jersey, please reach out to a CBIZ SALT team member.
© Copyright CBIZ, Inc. All rights reserved. Use of the material contained herein without the express written consent of the firms is prohibited by law. This publication is distributed with the understanding that CBIZ is not rendering legal, accounting or other professional advice. The reader is advised to contact a tax professional prior to taking any action based upon this information. CBIZ assumes no liability whatsoever in connection with the use of this information and assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein. Material contained in this publication is informational and promotional in nature and not intended to be specific financial, tax or consulting advice. Readers are advised to seek professional consultation regarding circumstances affecting their organization.
“CBIZ” is the brand name under which CBIZ CPAs P.C. and CBIZ, Inc. and its subsidiaries, including CBIZ Advisors, LLC, provide professional services. CBIZ CPAs P.C. and CBIZ, Inc. (and its subsidiaries) practice as an alternative practice structure in accordance with the AICPA Code of Professional Conduct and applicable law, regulations, and professional standards. CBIZ CPAs P.C. is a licensed independent CPA firm that provides attest services to its clients. CBIZ, Inc. and its subsidiary entities provide tax, advisory, and consulting services to their clients. CBIZ, Inc. and its subsidiary entities are not licensed CPA firms and, therefore, cannot provide attest services.
