Yes, New Jersey has a state income tax, and it is one of the highest in the nation
New Jersey residents pay state income tax on wages, self-employment income, investment gains, and other earnings. The state tax rate ranges from 1.4% to 10.75% depending on your income bracket, with higher earners paying the top rate. Unlike some states that tax only certain types of income, New Jersey taxes most forms of earnings.
The state also taxes capital gains, dividend income, and interest. If you work in New Jersey but live in another state, or live in New Jersey but work elsewhere, you may owe taxes to both states—though you can usually claim a credit to avoid paying twice on the same income.
Key Takeaways
- New Jersey's income tax brackets range from 1.4% for the lowest earners to 10.75% for the highest, with six tax brackets in between.
- The state taxes wages, self-employment income, capital gains, dividends, and interest income.
- If you work in New Jersey but live in Pennsylvania, Delaware, or New York, you may owe taxes to both states, though a reciprocal agreement or credit can reduce what you owe.
- New Jersey offers property tax credits and earned income tax credits that can lower your total tax bill if you meet income limits.
- You file New Jersey state taxes separately from federal taxes using Form NJ-1040 or a short form if your income is below a certain threshold.
How New Jersey's Tax Brackets Work
New Jersey uses a progressive tax system, meaning the rate increases as your income rises. You do not pay the top rate on all your income—only on the portion that falls into each bracket. For the 2024 tax year, the brackets start at 1.4% on income up to roughly $20,000 and climb to 10.75% on income over roughly $500,000. The exact dollar amounts adjust slightly each year for inflation.
Your filing status—single, married filing jointly, head of household—determines which bracket your income falls into. A married couple filing jointly reaches higher income thresholds before hitting each tax rate than a single filer does. You can find the current year's exact brackets on the New Jersey Division of Taxation website, or your tax software will explore them automatically when you enter your income.
What Income Gets Taxed in New Jersey
New Jersey taxes W-2 wages from your employer, self-employment income if you own a business or freelance, capital gains from selling stocks or property, dividend income from investments, and interest income from savings accounts or bonds. Certain types of income are exempt—for example, Social Security benefits are not taxed, and some retirement distributions may may have access to for partial exemptions depending on your age and income.
If you receive income from multiple sources, you report all of it on your state return. Your employer withholds state tax from your paycheck if you live and work in New Jersey, but if you are self-employed or have investment income, you may need to make quarterly estimated tax payments to avoid penalties.
Working Across State Lines: Reciprocal Agreements and Credits
If you live in New Jersey and work in Pennsylvania, Delaware, or New York, you may may have access to for a reciprocal tax agreement or a tax credit. Pennsylvania and New Jersey have a reciprocal agreement that allows residents of one state who work in the other to pay tax only to their home state. Delaware and New York do not have reciprocal agreements with New Jersey, but you can claim a credit on your New Jersey return for taxes paid to those states, which reduces your New Jersey liability.
The reverse also applies: if you live in Pennsylvania, Delaware, or New York and work in New Jersey, you may owe New Jersey tax on your wages. You would then claim a credit on your home state return. The key is understanding which state has the right to tax your income first. Your employer's payroll department can usually tell you whether they withhold for your home state or work state, but you should verify the rules for your specific situation.
Credits That Reduce Your New Jersey Tax Bill
New Jersey offers several credits that can lower the amount of state tax you owe. The Earned Income Tax Credit (EITC) is available to low- and moderate-income workers and can result in a refund even if you owe no tax. The Property Tax Credit helps homeowners and renters with limited income offset property taxes paid during the year. The Dependent Exemption Credit provides a credit for each dependent child or other may have access to dependent.
To claim these credits, you must meet income limits and other requirements set by the state. The EITC, for example, phases out as income rises, so a higher earner may not may have access to. Your tax software or a tax preparer can determine which credits you are may have access to to based on your income, filing status, and family situation.
How to File New Jersey State Taxes
You file New Jersey state taxes separately from your federal return. Most residents use Form NJ-1040, the standard state income tax return. If your income is below a certain threshold and you have no dependents or credits to claim, you may be able to use the shorter Form NJ-1040-SR or Form NJ-1040-EZ, though these forms are less common now.
You can file by mail, through the state's online filing system, or through tax software that supports New Jersey returns. The state important date is the same as the federal important date—usually April 15. If you file an extension for federal taxes, the extension applies to your state return as well. You can pay any taxes owed when you file, or set up a payment plan with the state if you cannot pay in full.
Self-Employment and Quarterly Estimated Taxes
If you are self-employed or have income that is not subject to withholding, you may need to pay quarterly estimated taxes to New Jersey. These are payments made four times a year—roughly in April, June, September, and January—based on your expected annual income and tax liability. Failing to pay estimated taxes can result in penalties and interest, even if you ultimately owe no tax when you file your annual return.
To determine whether you need to pay estimated taxes, calculate your expected income for the year and subtract any withholding from other sources. If the result is $400 or more, you likely owe estimated taxes. The New Jersey Division of Taxation provides a worksheet to help you calculate the amount. If your income is uneven throughout the year, you can adjust your payments quarterly based on actual earnings rather than using equal installments.
Frequently Asked Questions
Does New Jersey tax retirement income or pensions?
Social Security benefits are not taxed in New Jersey. Military pensions and some other government pensions have partial exemptions. Private pensions and 401(k) withdrawals are generally taxable, though you may may have access to for an exemption if you are over a certain age and your income is below a threshold. Check the state's rules for your specific type of retirement income.
What if I moved to New Jersey mid-year?
You file a part-year resident return and pay New Jersey tax only on income earned while you were a resident. You also owe tax to your previous state on income earned there. Your tax software can handle part-year calculations, or you can contact the New Jersey Division of Taxation for guidance on how to report your income.
Can I deduct federal taxes paid from my New Jersey return?
No, New Jersey does not allow a deduction for federal income taxes paid. However, you can deduct state and local property taxes, mortgage interest, and charitable donations if you itemize deductions on your federal return, which may indirectly lower your federal tax and affect your state tax calculation.
What happens if I do not file a New Jersey return?
If you owe New Jersey tax and do not file, the state can assess penalties and interest on the unpaid amount. If you are owed a refund but do not file, you have a limited time to claim it—usually three years. If you think you do not owe tax, it is still safer to file and let the state confirm that, rather than risk penalties.
How do I know if I have to file a New Jersey return?
You must file if your income exceeds the filing threshold for your age and filing status. The threshold is higher for seniors and varies by year. If you are unsure, the New Jersey Division of Taxation website lists the current thresholds, or you can contact them directly. When in doubt, filing is safer than not filing.