Bob Sandler wrote:

- quote -

I assume the IRS has issued or will issue a similar
ruling on the California "Vehicle License Fee" rebate?

A quick summary. When initially issued, California rebated
in a separate check 65% of the value-based component of
the vehicle license fee. Sometime later, it was taken
directly off the bill, when the legislature finally
realized that the separate check was a blatent attempt
to have people believe the governor was sending them
money.

Then, in early 2003, the governor "automatically"
repealed the rebate, effective September 2003.
The Governator recinded that order retroactively,
and ordered separate rebate checks sent to those
who paid the higher fee.

Again, it seems clear to me that the rebate is
subtracted from the tax paid if it's for the
same (vehicle) year, but is a possibily taxable
property tax refund if received in a later year.

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- quote -

Revenue Ruling 78-194
http://www.taxlinks.com/rulings/1978/revrul78-194.htm

- quote -

It did NOT give a choice. It says you have to offset the
Homestead Rebate against the real estate tax deduction on
Schedule A line 6.

- quote -

It is called "NJ SAVER."

- quote -

IRS News Release No. NJ-2003-04
http://www.state.nj.us/treasury/taxa...elease2003.pdf

It DOES give a choice. It says you can either report it on
Form 1040 line 21 (Other Income) or offset it against the
real estate tax deduction on Schedule A line 6.

- quote -

According to Revenue Ruling 78-194, cited above, the
Homestead Rebate is a refund of real estate tax that the
homeowner paid in the same year that he received the rebate.
Documents from the state make it clear that the NJ SAVER
rebate is a return of real estate tax that the homeowner
paid in the previous year. So the Homestead Rebate you
receive in 2003 is a refund of real estate tax that you paid
in 2003. The NJ SAVER rebate that you receive in 2003 is a
refund of real estate tax that you paid in 2002.

- quote -

The "newer guidance," IRS News Release NJ-2003-04, also
cited above, applies to both rebate programs. It does not
make any distinction between them. However, it refers to
Pub. 525. That publication does not mention the NJ rebates
explicitly, but it does make a distinction based on whether
the recovery is for taxes paid in the same year or the
previous year.

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Tax law is supposed to be confusin' <G
ok-here's my understanding of the situation...

Many years ago NJ started something called a "homestead rebate"
(pay careful attention to the terminology)

The IRS had issued some guidance on how to deal with it - could
be a Rev Rul - but I can't be certain exactly what form or format
it was. That guidance gave a choice on how to handle it - reduce
prop taxes or pick up the additional inome. Enter Florio as
governor - the program was trashed as a rebate to homeowners and
was transformed into a welfare program. This program henceforth
pretty much became extinct.

A few years later (mid 90's) a new program was instituted to
provide rebates for NJ homeowners. This new program was called
the "property tax rebate" (note the different label for the new
program). The IRS issued some sort of guidance on this program
stating that it should be picked up into income. It doesn't
give a choice on how to handle it. I think technically these
two programs were calculated differently (voodoo government
calculations at work here). I don't know if the newer guidance
officially superceeded the older guidance. But I believe that
each item was geared towards the particular program.

Having said all that, it may be a mute exercise as the current
governor wants to do the same thing to the property tax rebate
as was done to the homestead rebate.


--
<<< Benjamin Yazersky CPA [NJ & NY] > >
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Benjamin Yazersky CPA wrote:
- quote -

You now have me confused. I thought the Saver rebate was a
property tax rebate. The document in question says:
"IRS CLARIFIES HOW TO REPORT NEW JERSEY PROPERTY TAX REBATES"
It specifically addresses the Homestead and Saver rebates.
Is there some other rebate you are referring to?

--
Alan
http://taxtopics.net

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"A.G. Kalman" <glendale202-mtm[at]yahoo.com> wrote:
- quote -

Thanks Alan for the source. Just goes to show me that the
IRS (over the phone) does not always offer the COMPLETE
advice. Seems like they break questions down to a form etc.
and I got a Schedule A person. If I used Schedule A I'd get
an extra $5 back. Maybe when I get my refund I should file
an amended return to get the $5.

Just kidding of course!!
Dan

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"A.G. Kalman" <glendale202-mtm[at]yahoo.com> wrote:
- quote -

Be careful here. I think we may be talking about two
different things here. One is the Homestead Rebate and the
other is the Property Tax Rebate.

Your comment about having a choice was dealing with the old
Homestead Rebate, which for the most part is all but extinct
(Florio had transformed it into a welfare program and as
such no longer has much of anything to do with property
taxes). I was referring to the Property Tax Rebate, which
taxpayers have actually received in recent years.
Technically, the Homestead Rebate was an offset to property
taxes, while the Property Tax Rebate is not. Hence the
different treatment.

--
<<< Benjamin Yazersky CPA [NJ & NY] > >
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- quote -

I agree!!!- Had forgotten the instruction. However,
reading line 10, is misleading to the extent it refers to
"Taxable Refunds" as well as "Credits", etc.

http://www.state.nj.us/treasury/taxa...elease2003.pdf

"Jack" - John H. Fisher - TaxService[at]aol.com
Philadelphia, Pa - Atlantic City, NJ - West Wildwood, NJ
My Newsgroups & Boards at: http://members.aol.com/TaxService/index.html

Where Ignorance is bliss, 'tis folly to be wise!=

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Benjamin Yazersky CPA wrote:
- quote -

News Release dated Jan. 27, 2002.
http://www.state.nj.us/treasury/taxa...elease2003.pdf

The release said the taxpayer had a choice: Enter it as
Other Income on the 1040 or offset current year property
taxes paid on the Schedule A.

My notes: For any taxpayer who itemizes and is subject to
limitation, they should use the standard recovery technique
identified in Worksheet 2 of Pub 525 in order not to
overstate taxable income.

--
Alan
http://taxtopics.net

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- quote -

Line 10 is for refunds of *income* tax. The Homestead Rebate
that the original poster asked about is a refund of real
estate tax.

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"Benjamin Yazersky CPA" <BYaz55DoNotHitReply[at]netscape.net> wrote:
- quote -

Thanks. After being on hold over an hour, an agent said it
goes on Line 21. Actually in my case I tried both methods
and it's $5 less if I use Schedule A.

Dan

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- quote -

Put it on line 10 of Form 1040 "Taxable Refunds", etc.

"Jack" - John H. Fisher - TaxService[at]aol.com
Philadelphia, Pa - Atlantic City, NJ - West Wildwood, NJ
My Newsgroups & Boards at: http://members.aol.com/TaxService/index.html

Where Ignorance is bliss, 'tis folly to be wise!=

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"Dannie" <sloopoke.noname[at]nospam.optonline.net> wrote:

- quote -

The IRS issued guidance about 3 years ago stating that it
goes on line 21 other income and the description for the
line should be "Property Tax Rebate".

Don't have the exact IRS release handy.

--
<<< Benjamin Yazersky CPA [NJ & NY] > >
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- quote -

Last year the IRS Media Relations Office in Springfield, NJ,
issued a News Release, No. NJ-2003-04, which says that you
can do it either way. However, the News Release refers to
Revenue Ruling 78-194, which says that you must reduce the
property tax deduction on Schedule A Line 6 by the amount of
the rebate. The Revenue Ruling considers the Homestead
Rebate that you receive in 2003 to be a return of property
tax paid in 2003, not a refund of property tax paid in 2002.

Note that this Revenue Ruling applies only to the Homestead
Rebate, not the NJ Saver rebate, which did not exist at the
time the ruling was issued. The state clearly states that
the NJ Saver rebate is a refund of the previous year's
property tax. (I.e. the NJ Saver rebate you receive in 2003
is a refund of property tax you paid in 2002.) I therefore
think it should go on 1040 line 21, but I would defer to the
opinions of the tax experts here.

IRS News Release No. NJ-2003-04 is available in Adobe
Acrobat PDF format at this link:

http://www.state.nj.us/treasury/taxa...elease2003.pdf

(The 2002 date at the top of the News Release is a typo. It
was issued in January, 2003.)

Revenue Ruling 78-194 is at:

http://www.taxlinks.com/rulings/1978/revrul78-194.htm

Bob Sandler
not a tax professional

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I know that NJ does not send out 1099's to the people who
get this rebate, and I know the IRS considers it a recovery
but the issue remains where to show it on the 1040. I should
add that if in the prior year you did not itemize your
deductions (Schedule A) then you do not have to report it at
all. However, should you need to report it than it can be
done on 1040 Line 21 (Other Income) or Schedule A Line 6
(Taxes), reducing the taxes you paid. Is anyone aware if
this is true or has the IRS issued firmer rules. All other
data being the same, where you place the money will give
different results.

Dannie

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