19 Aug How income impacts the Senior Freeze

Q. Does the Senior Freeze income restriction include Required Minimum Distributions (RMDs)?
— Senior

A. That’s a great question as a follow to our recent story on property tax help for seniors in New Jersey.

We went back to Bernie Kiely, a certified financial planner and certified public accountant with Kiely Capital Management in Morristown, for the lowdown.

He said New Jersey has one of the highest property taxes in the nation, and this may be especially burdensome for senior citizens and the disabled, who may live on a fixed income.

The state instituted the Senior Freeze Program in an effort to help seniors and the disabled.

Kiely said the Property Tax Reimbursement (“Senior Freeze”) Program reimburses senior citizens and disabled persons for property tax increases.

“For applicants who met all the eligibility requirements for 2014, and again for 2015, the amount of the 2015 reimbursement, which will be paid in 2016, will be the difference between the amount of property taxes that were due and paid by the applicant for 2014 and the amount of property taxes that were due and paid for 2015, provided, of course, that the amount paid for 2015 was greater than the amount paid for 2014,” Kiely said. “For mobile home owners, property tax means 18 percent of the annual site fees paid to the owner of a mobile home park.”

To qualify for the 2015 reimbursement, the applicant must meet all of the following requirements.

• You must have been age 65 or older as of Dec. 31, 2014, or actually receiving federal Social Security disability benefit payments on or before Dec. 31, 2014, and on or before Dec. 31, 2015. You do not qualify if the federal Social Security disability benefits you (or your spouse/civil union partner) were receiving were received on behalf of someone else; and
• You must have lived in New Jersey continuously since Dec. 31, 2004, or earlier as either a homeowner or a renter; and
• You must have owned and lived in your home (or have leased a site in a mobile home park on which you have placed a manufactured or mobile home that you own) since Dec. 31, 2011, or earlier (and you still owned and lived in that home on Dec. 31, 2015); and
• You must have paid the full amount of the property taxes due on your home: For 2014: By June 1, 2015, and for 2015: By June 1, 2016; and
• Your total annual income must have been: For 2014: $85,553 or less, and for 2015: $87,007 or less. These limits apply regardless of your marital status.

To your question about income limitations, Kiely said, with very few exceptions, all income that you received during the year, including income which you are not required to report on your New Jersey income tax return, must be taken into account to determine eligibility for the property tax reimbursement.

“Income limits for eligibility are subject to adjustment annually. If you have a loss in one category of income, it may be applied against income in the same category,” Kiely said. “However, if you have a net loss in one category of income, it cannot be applied against income or gains in another. In the case of a net loss in any category, leave that line blank.”

Examples of possible sources of income (gross amounts unless otherwise noted) are as follows:
• Social Security benefits (including Medicare Part B premiums) paid to or on behalf of the
applicant
• Pension and retirement benefits (including annuity or IRA distributions and benefit payments from foreign countries)
• Salaries, wages, bonuses, commissions and fees
• Unemployment benefits
• Disability benefits, whether public or private (including veterans’ and black lung benefits)
• Interest (taxable and exempt)
• Dividends
• Capital gains
• Net rental income
• Net profits from business
• Net distributive share of partnership income
• Net pro rata share of S Corporation income
• Support payments
• Inheritances
• Royalties
• Fair market value of prizes and awards
• Gambling and lottery winnings (including New Jersey Lottery)
• Bequests and death benefits
• All other income

“As you can see from the above, IRA distributions are includable as income for Senior Freeze purposes,” Kiely said. “When you turn 70½ you must begin taking your Required Minimum Distributions (RMDs).”

RMDs have many effects:
• They may result in your Social Security income becoming federally taxable
• They will raise the 7½ percent threshold for medical expense deductions
• They may limit your itemized deductions
• They may reduce or eliminate your personal exemptions
• They may increase your income such that you are no longer eligible for Senior Freeze Freeze benefits.

That’s the story. Let us know if you want any additional clarifications.

Email your questions to .

This post was first published in August 2016.