New Jersey Approves FY 2027 Budget: A Closer Look at the Tax Changes

On June 30, 2026, New Jersey enacted its state budget, bringing with it several tax law changes for individuals, corporations, and pass-through business owners.

The following provisions are among the most notable changes included in the legislation.

NOL Deductions Temporarily Limited (A5322)

As part of A5322, New Jersey temporarily limits the use of Corporation Business Tax net operating loss (NOL) deductions to $1 million per year for privilege periods ending on or after July 31, 2026, and before July 31, 2030. NOLs disallowed as a result of the limitation are not lost and may generally be utilized in later years. However, for privilege periods ending on or after July 31, 2030, and before July 31, 2032, taxpayers may use these deferred NOLs only to the extent the deduction does not reduce allocated entire net income by more than 75%.

For a tax year of less than 12 months, the $1 million limitation is prorated based on the number of months in the short tax year.  To help preserve the benefit of deferred NOLs, the legislation also permits affected NOL deductions to be carried forward for up to six additional privilege periods beyond their normal expiration date. The law also provides that no interest or penalty will be assessed for certain estimated tax underpayments due after December 31, 2025, and before January 1, 2027, if the underpayment results from the NOL limitation.

Alternative Business Calculation Adjustment Reduced (A5323)

For tax years beginning on or after January 1, 2026, New Jersey is limiting a deduction that can benefit sole proprietors, partners, S corporation shareholders, rental property owners, and certain taxpayers with royalty-related income. Taxpayers with gross income of $500,000 or less remain eligible to deduct 50% of their business increment. For taxpayers with gross income of more than $500,000 but less than $1 million, the deduction is reduced to 25% of the business increment. Taxpayers with gross income greater than $1 million are no longer eligible for the deduction.

New Employer Medicaid Assessment Enacted (A5324)

New Jersey enacted a new employer assessment intended to help offset State Medicaid costs. The assessment applies to employers that employed at least 50 employees receiving Medicaid benefits during the prior calendar year and is imposed on both covered employees and their covered dependents. The annual assessment is $325 per covered individual for employers with 50 to 249 Medicaid-covered employees, $525 per covered individual for employers with 250 to 499 Medicaid-covered employees, and $725 per covered individual for employers with 500 or more Medicaid-covered employees.

Stay NJ Benefits Narrowed (A5327)

The FY 2027 budget narrows eligibility for Stay NJ while retaining the program’s maximum $6,500 benefit.  Seniors with incomes of $100,000 or less may qualify for the full $6,500 benefit, those with incomes between $100,000 and $150,000 may qualify for up to $5,000, and those with incomes between $150,000 and $200,000 may qualify for up to $4,000. Taxpayers with incomes exceeding $200,000 are no longer eligible for Stay NJ benefits.

Child Tax Credit Expanded (S4531)

As part of the FY 2027 budget package, New Jersey temporarily increased the Child Tax Credit for tax years 2026 through 2028. The credit remains available to resident taxpayers with New Jersey taxable income of $80,000 or less who have a qualifying child under age six. Depending on income levels, the enhanced credit represents an increase of up to 25% over the prior benefit. Married filing separately taxpayers are not permitted to claim the credit, and the increased credit amounts revert after 2028.

NJ Taxable Income	Prior Credit	2026-2028 Credit	Increase
$30,000 or less	$1,000	$1,250	$250
Over $30,000 to $40,000	$800	$1,000	$200
Over $40,000 to $50,000	$600	$750	$150
Over $50,000 to $60,000	$400	$500	$100
Over $60,000 to $80,000	$200	$250	$50

If you’re unsure how the tax changes included in New Jersey’s budget may affect you or your business, our team can help assess the impact and provide guidance on planning opportunities.  Please call 215.675.8364 or email us to speak with a state and local tax professional today.

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