February 22, 2001
IRS CLARIFIES HOW TO REPORT NEW JERSEY PROPERTY TAX REBATES
- To help New Jersey taxpayers understand and meet their tax responsibilities, the Internal Revenue Service today explained the reporting requirements for the New Jersey SAVER Rebate Program.
"Last year, homeowners in New Jersey received a rebate averaging $240 of their 1999 property taxes," explained Gregg Semanick, IRS spokesperson. "For taxpayers that claimed itemized deductions, including property taxes, on last year's Federal income tax return, it will be necessary to report the rebate as income for 2000. Residents will not receive a Form 1099 from the State of New Jersey since this is not an income tax refund."
"Rebates of this type are called 'recoveries'," Semanick said. "A recovery is a return of an amount you deducted or took credit for in an earlier year. In this case, it is the deduction you took for your property taxes in 1999. Taxpayers who itemized last year enjoyed the benefit of taking a deduction for the entire amount of their property tax payment. However, since they received part of that deduction back in the form of a property tax rebate, after they filed their return, these taxpayers will have to report that rebate as income on this year's return."
New Jersey taxpayers should report the rebate on Line 21 of Form 1040. Line 21 is designated for reporting "Other Income" and has a space for describing the income. Taxpayers should enter "Property Tax Rebate" in the space provided on the return.
Taxpayers who used the standard deduction, or who did not claim their property tax as an itemized deduction in 1999, do not have to report the rebate as income. By not claiming an itemized deduction for property taxes, these taxpayers did not receive a special tax benefit and therefore there is no taxable recovery.
The IRS suggests that taxpayers review the explanation of Other Income on page 25 of the Form 1040 Instruction booklet. Taxpayers can find a more detailed explanation of recoveries on pages 16-21 of IRS Publication 525. Taxpayers are also encouraged to discuss their specific tax situation with the tax professional that prepares their return.
Tax Assistance is available 24 hours per day, seven days a week, on the IRS toll-free telephone line at 1-800-829-1040 or on the IRS Internet site