A group of New Jersey lawmakers is advocating for a tax break for drivers who have endured four consecutive toll increases on state highways. Their proposal aims to allow E-ZPass users to deduct toll payments from their state income tax. The specifics of the deductible amounts vary across the different legislative drafts. However, the idea of permitting toll deductions on state income taxes has struggled to gain momentum in New Jersey and other states in the past.
In fact, one of the only two states that previously allowed such deductions for E-ZPass users repealed the provision in 2021.
There are five different versions of the proposal, but all share a common stipulation: E-ZPass fees, fines, or tolls that qualify as business expenses and are either reimbursed by an employer or deducted from federal taxes cannot be deducted under this bill.
Should the legislature pass the bill and Governor Phil Murphy sign it into law, New Jersey would offer a tax benefit to its residents that is rare among states and not permitted by the IRS — allowing tolls paid during commutes to be deducted from state income taxes.
A bipartisan bill provides the most substantial tax relief for drivers. This proposal, introduced by state Senator Patrick Diegnan, a Democrat from Middlesex, and state Senator James Holzapfel, a Republican from Ocean, would allow drivers to deduct up to $1,000 from their state income taxes for travel on any toll road within the state or any bi-state bridge and tunnel authority connecting to New Jersey.
This bill was introduced in January and is currently awaiting a hearing by the Senate Budget and Appropriations Committee.
Diegnan credited Holzapfel for the concept that led to the legislation. “It’s basically to give tax relief to folks who have to commute to live their lives,” Diegnan explained in an interview. “The idea at the time was (due to) the increase in the gas taxes, but it’s even more relevant with the increases in tolls.”
On March 26, Governor Phil Murphy signed into law legislation (A4011) renewing the state’s Transportation Trust Fund, which finances major highway, bridge, and transit construction projects within New Jersey. The renewal generates a total of $15.6 billion over five years to support these projects, funded by a 1.9-cent annual increase in the current 42.3-cent-per-gallon gas tax over five years.
Diegnan highlighted the high cost of commuting into New York City, where drivers face a $17 cash toll in addition to other expenses, as another justification for the bill.
A version of the bill introduced by state Assemblyman Gregory McGluckin, a Republican from Ocean, would limit the $1,000 annual tax deduction to users of the New Jersey Turnpike, Garden State Parkway, and Atlantic City Expressway if they spend more than $1,000 in tolls via E-ZPass.
In the bill statement, McGluckin pointed out that the Turnpike Authority contributes $455 million annually to NJ Transit’s operating budget, and noted that toll payers are “paying more than their fair share for transportation and economic development projects.”
Another bill would allow drivers to write off 50% of their E-ZPass tolls on the Turnpike and Parkway, excluding fines, fees, and tolls reimbursed by an employer or deducted from federal taxes as business expenses.
This proposal was introduced by Assemblyman Robert J. Karabinchak, a Democrat from Middlesex, with co-sponsorship from Assemblywomen Shama Haider and Ellen Park, and Assemblyman Clinton Calabrese, all Democrats from Bergen County.
A variation of that bill would have the state establish and fund a $250 million toll relief program, crediting 50% of tolls paid on the Turnpike, Parkway, and Atlantic City Expressway to a driver’s private E-ZPass account, with the credit valid for one year only.
Holzapfel sponsored the Senate version, while Assemblymen Paul Kanitra and McGluckin, both Republicans from Ocean County, sponsored the Assembly version.
“We wish tolls were fair and toll diversion was nonexistent but since that is not the case, we appreciate the attempts at compensation to make up for the disparity,” said Steve Carrellas, National Motorists Association state policy director.
The association’s preference, Carrellas noted, would be “more legislative constraints on the two NJ toll road authorities for toll rate setting.” He was referring to the 2020 policy change that introduced an annual 3% toll increase on the Parkway and Turnpike through a process called indexing, which lacks an end date.
“That is the most direct and efficient solution and would lead to much more transparency than exists today,” Carrellas added.
Currently, the federal Internal Revenue Service only allows toll deductions for business travel, meaning that commuting and other driving expenses cannot be written off.
However, the proposed bills face significant challenges. Similar bills have been introduced in past years but failed to progress beyond the legislative committees to which they were assigned.
“We’re not talking about a monumental amount,” Diegnan said. “I think the governor and senate president and speaker are concerned about giving tax relief to folks. I believe it has a good chance of passing.”
Lawmakers in other states, including Maine, New York, and Indiana, have also tried, without success, to pass their own versions of New Jersey’s toll deduction legislation.
Only two states have ever allowed drivers to deduct E-ZPass tolls. West Virginia previously offered a deduction of up to $1,200 for tolls paid via E-ZPass or two state-issued cards for non-commercial travel, but that law was repealed in 2021. Massachusetts remains the only state that still allows a deduction for tolls and transit fares exceeding $150 per person, with a maximum deduction of $750, a provision in place since 2006.
{Matzav.com}