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Bill

S 4289

Increases gross income tax deduction available to veterans from $6,000 to $9,000 and indexes deduction for inflation.

2026-2027 Regular Session Introduced by Raj Mukherji and 2 co-sponsors

In New Jersey, the veteran deduction rises from $6,000 to $9,000 starting 2026, with annual inflation indexing from 2027 using the CPI-U.

Referred to Senate Budget and Appropriations Committee
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WeVote Research Nonpartisan
Bill Summary · S 4289

Overview

  • Bill: S 4289
  • Session: 222
  • Jurisdiction: New Jersey
  • Purpose: Increase the gross income tax deduction available to veterans from $6,000 to $9,000 and begin indexing the deduction for inflation starting in tax year 2026 (annual adjustments beginning with tax year 2027).

Key Provisions

  • Amendment to N.J.S.54A:3-1 (Personal exemptions and deductions):
    • Maintains the structure of personal exemptions and additional exemptions.
    • The notable change is in the veteran exemption:
    • For a taxpayer who is a veteran honorably discharged or released under honorable circumstances from active duty in the U.S. Armed Forces, a reserve component, or the New Jersey National Guard in a federal active duty status: the exemption increases from $6,000 to $9,000.
    • Inflation indexing: Starting in tax year 2027, the veteran exemption amount will be adjusted annually in direct proportion to the percentage increase in the Chained Consumer Price Index for All Urban Consumers (C-CPI-U) for the 12-month period ending August 31 of the preceding tax year, as published by the U.S. Department of Labor. If the index does not rise, the exemption remains the same for that year.
    • The $9,000 veteran deduction applies to tax year 2026 and beyond (subject to the inflation adjustment beginning in 2027).
  • Other sections (personal exemptions for spouse, dependents, age, blindness/ disability, etc.) remain unchanged in substance.
  • Effective date: The act takes effect immediately and applies to taxable years beginning on or after January 1, 2026.

Who is Affected

  • Veterans in New Jersey who claim the state gross income tax deduction for veterans’ benefits, specifically:
    • Individuals honorably discharged or released under honorable circumstances from active duty in the U.S. Armed Forces, a reserve component, or the New Jersey National Guard in federal active duty status.
  • Potential impact also indirectly affects taxpayers’ overall taxable income calculations by increasing the veteran deduction amount and introducing future inflation-based adjustments.

Timelines and Procedures

  • Effective date: Immediate enactment for taxable years starting January 1, 2026.
  • Inflation indexing timeline:
    • Beginning tax year 2026: The base veteran deduction remains at $9,000 (subject to later indexing).
    • Beginning tax year 2027: Annual indexing to adjust the deduction amount for inflation using the percentage change in the C-CPI-U for the 12 months ending August 31 of the prior tax year.
    • If the C-CPI-U does not increase, the deduction amount remains unchanged for that year.

Practical Impact

  • Fiscal effect: Increases the allowed deduction for veterans by $3,000 (from $6,000 to $9,000) starting in 2026, with ongoing inflation-adjusted increases thereafter.
  • Administrative considerations: Taxpayers will need to apply the updated deduction amount for the 2026 filing season and later ensure the annual inflation adjustment is applied in accordance with the CPI index data.

Compliance and Compliance Checks

  • The bill retains the existing framework for other exemptions and deductions, with the notable exception of the enhanced veteran deduction and its indexing.
  • Nonresident considerations remain aligned with current rules, including proportional limitations if applicable.

Sponsor and Status

  • Introduced in the Senate on May 14, 2026.
  • Co-sponsor: Raj Mukherji
  • Referred to Senate Military and Veterans' Affairs Committee

This summary provides a concise, nonpartisan outline of S 4289, focusing on its substantive changes, affected groups, and key timing for implementation.

Compiled from official sources — confirm details with the bill’s official record.

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