New year, new tax breaks for college students and their families
The programs introduced last year as a result of a measure passed into law enable New Jersey residents with yearly household incomes of less than $200,000 to deduct up to $22,500 on their state income tax payments.
“There has been much discussion about making New Jersey more affordable and struggling with what that means for New Jersey families going ahead,” Assembly Speaker Craig Coughlin (D-Middlesex), the bill’s author, said Thursday. “I’m pleased that we’re continuing to address one of the most significant impediments — if not the most significant — to students receiving a degree, and that is cost.”
According to the United States Department of Education, over 13% of New Jersey citizens owe money on federal student loans, with an average outstanding sum of $35,600. This amount excludes debt incurred via commercial or government-sponsored loans.
The first deduction entitles qualifying New Jersey residents to a deduction of up to $10,000 for in-state tuition. Tuition payments made with private or governmental student loans are not deductible.
Additionally, residents may deduct up to $2,500 in student loan payments made via the New Jersey College Loans to Assist State Students (NJ CLASS) program.
Supplementary loan awards, managed by the New Jersey Higher Education Student Assistance Authority, often have lower interest rates than federal and private supplemental loans.
The Basics of Bankruptcy
All bankruptcies begin with the filing of bankruptcy documents with the court, which identify every obligation you owe, including student loan debt. In a typical Chapter 7 proceeding, the bankruptcy discharge order that erases your debts would be delivered to you four months later, but it would not include your school loans. You would still be obligated to pay them after the Bankruptcy in Alabama court closed your case.
If you submit a separate adversary complaint to the bankruptcy court, the bankruptcy court will schedule a separate bankruptcy trial, often known as a “adversary procedure,” for the purpose of discharging student loans. The lawsuit is served on your loan provider and given a different case number from your bankruptcy proceedings.
The trial is conducted before a bankruptcy court, and the adversarial litigation includes a discovery period during which each side asks information from the other. The loan provider offers a defense, and you submit facts supporting your position.
The standard your bankruptcy court will apply to determine what you must prove in order to succeed at trial will vary.
Borrowers must first get direct federal loans before applying for NJ CLASS.
The final deduction Coughlin emphasized Thursday enables homeowners to deduct up to $10,000 in donations to an NJ BEST account. Students and their families may contribute to tax-advantaged 529 savings accounts to cover tuition and loan costs.
Additionally, the legislation offers up to $750 in matching funds for first contributions into newly opened NJ BEST accounts by taxpayers earning up to $75,000 in annual income.
“We have such a 529 account for our grandchildren because we cannot conceive of a better gift,” The higher education committee chair, Mila Jasey (D-Essex), agreed. “We understand they’d prefer Barbies and (Matchbox) cars, much alone Nintendo Switches, but they’ll thank us afterwards, and their parents will be relieved it’s not Play-Doh.”
The deductions will not be accessible to filers until April 2023; however, matching money for the first NJ BEST deposits is available immediately.
In June, the measure passed both houses unanimously and was signed into law by Gov. Phil Murphy.
Last year, the Office of Legislative Services estimated that the deductions would cost the state between $87.2 million and $105.9 million in lost income each year, with an extra $10 million one-time expense in the current fiscal year for matching contributions into NJ BEST accounts.
“The government is here to assist,” Coughlin said. “Children and parents deserve our help in order to fulfill their full social and economic potential – in order to realize their goals.”