Yes, New Jersey has a state income tax

New Jersey charges a state income tax on wages, self-employment income, investment gains, and other earnings. The tax rate depends on your income level and filing status — it ranges from 1.4% on the lowest earners to 10.75% on the highest. Unlike some states, New Jersey does not exempt retirees or Social Security income from this tax, though certain types of income (like municipal bond interest) are excluded.

If you work in New Jersey or live there, you will owe state income tax on most types of income. The state collects this through withholding from paychecks and through estimated tax payments for self-employed workers and investors. New Jersey residents who work out of state may also owe tax to both states, though the state offers a credit to prevent double taxation.

Key Takeaways

  • New Jersey's income tax rate ranges from 1.4% to 10.75% depending on your income bracket and filing status.
  • The state taxes wages, self-employment income, capital gains, and most other types of income, with few exceptions.
  • If you live in New Jersey, you owe state income tax on all income regardless of where you earn it.
  • New Jersey does not exempt retirement income or Social Security from state taxation, unlike some neighboring states.
  • Employers withhold state income tax from paychecks, and self-employed workers must make quarterly estimated payments.

How New Jersey income tax brackets work

New Jersey uses a progressive tax system, meaning your tax rate increases as your income rises. The state has multiple tax brackets, and your rate depends on which bracket your income falls into. For the 2024 tax year, the brackets start at 1.4% for the lowest income earners and climb to 10.75% for those earning over a certain threshold (the exact threshold varies by filing status).

Your filing status — single, married filing jointly, married filing separately, or head of household — determines which bracket applies to your income. A married couple filing jointly reaches higher income levels before moving to the next bracket than a single filer would. You can find the current year's brackets on the New Jersey Division of Taxation website, which updates them annually.

The tax is calculated on your taxable income, not your total income. You subtract deductions (either the standard deduction or itemized deductions) from your gross income to arrive at the amount that actually gets taxed. This means your effective tax rate — the percentage of your total income that goes to taxes — is lower than your marginal rate (the rate on your last dollar earned).

What income is taxed and what is not

New Jersey taxes most types of income: W-2 wages, self-employment income, rental income, capital gains from selling stocks or property, interest, and dividends. The state also taxes income from pensions, annuities, and distributions from retirement accounts like IRAs and 401(k)s. Unlike some states, New Jersey does not exempt Social Security benefits or military pensions from state taxation.

A few categories of income are not taxed by New Jersey. Interest from U.S. Treasury bonds and municipal bonds issued by New Jersey municipalities is excluded. Certain disability benefits, workers' compensation, and some insurance proceeds are also not taxed. If you receive an inheritance, that is not taxable income in New Jersey (though the estate itself may owe federal estate tax if it is large enough).

If you have income from multiple sources, each type may be treated differently. For example, long-term capital gains (from selling an asset you held for more than a year) may have different rules than short-term gains. The New Jersey Division of Taxation publishes guidance on how to report different income types on your state return.

Who must file a New Jersey state tax return

You must file a New Jersey state income tax return if you are a resident and your income exceeds the filing threshold for your age and filing status. The threshold is based on your gross income and varies — for example, a single person under 65 typically must file if their gross income is above a certain amount (check the Division of Taxation website for the current year's threshold). If you are 65 or older, the threshold is higher.

Non-residents who earned income in New Jersey may also have to file, even if they do not live there. This includes people who worked in the state for part of the year or received New Jersey-source income like rental payments or business profits. Non-residents file a different form (the NJ-1040-NR) and only report income earned in New Jersey, not income from other states.

Even if you are not required to file, you may want to file anyway if you had taxes withheld from your paychecks or made estimated payments. Filing allows you to claim a refund of any overpayment. New Jersey also offers tax credits for certain situations (like property tax relief for homeowners or renters), and you must file to claim those.

How withholding and estimated taxes work

If you are a W-2 employee, your employer withholds New Jersey state income tax from each paycheck based on the W-4 form you complete. The amount withheld depends on your income, filing status, and the number of dependents you claim. You can adjust your withholding at any time by submitting a new W-4 to your employer if you expect a large refund or owe money at tax time.

If you are self-employed, a freelancer, or have significant income from investments or rental property, you must make quarterly estimated tax payments to New Jersey. These are due on April 15, June 15, September 15, and January 15 of the following year. You calculate your estimated tax based on your expected annual income and pay one-quarter of that amount each quarter. If you underestimate, you may owe penalties and interest when you file your return.

Estimated payments are made directly to the New Jersey Division of Taxation, usually online through their payment portal. If you have a large change in income during the year, you can adjust your remaining quarterly payments to avoid overpaying or underpaying. Keep records of all payments you make, as you will need them when you file your annual return.

Filing your New Jersey state tax return

New Jersey residents file their state income tax return using Form NJ-1040 (or NJ-1040-NR if you are a non-resident). The return is due on April 15 of the year following the tax year, the same important date as the federal return. If you file your federal return late and request an extension, that extension also applies to your New Jersey return.

You can file your New Jersey return by mail, online through the Division of Taxation's website, or through a tax preparation service or accountant. Many people use tax software that handles both federal and state returns in one process. If you use a paid preparer, make sure they are familiar with New Jersey's rules, as some deductions and credits are state-specific.

When you file, you will report all income from all sources, subtract deductions, and calculate your tax liability. You will also claim any credits you are may have access to to (such as property tax relief or dependent exemptions). If you had too much withheld or made overpayments, you will receive a refund; if you underpaid, you will owe the difference plus any applicable interest or penalties.

Tax credits and deductions available in New Jersey

New Jersey offers several tax credits that can reduce your tax bill. 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 state also offers a Property Tax Relief Credit for homeowners and renters who meet income limits, and a Dependent Exemption Credit for each dependent you claim.

On the deduction side, you can claim either the standard deduction (a fixed amount based on your filing status) or itemize deductions if they exceed the standard amount. Itemized deductions may include mortgage interest, property taxes, charitable contributions, and medical expenses. New Jersey also allows a deduction for contributions to certain retirement accounts and education savings plans.

Some credits and deductions are temporary or phase out at higher income levels, so check the Division of Taxation's current guidance to see what you may be may have access to to. The rules change periodically, and what was available last year may not be available this year.

Frequently Asked Questions

Do I have to pay New Jersey income tax if I work in another state?

If you live in New Jersey, you owe state income tax on all your income, regardless of where you earn it. However, if you also paid income tax to another state where you worked, New Jersey allows a credit for taxes paid to that state to prevent double taxation. You will need to file returns in both states and claim the credit on your New Jersey return.

Is Social Security taxed in New Jersey?

Yes, New Jersey taxes Social Security benefits. Unlike some states, New Jersey does not exempt Social Security income from state taxation. However, if your total income is below a certain threshold, you may not owe state tax on your benefits. The exact calculation depends on your filing status and other income sources.

What happens if I do not file a New Jersey tax return?

If you are required to file and do not, the state may assess penalties and interest on any tax you owe. The Division of Taxation can also pursue collection action. If you are owed a refund, you have a limited time to claim it — typically three years from the original due date. If you missed a important date, contact the Division of Taxation to discuss your options.

Can I deduct property taxes on my New Jersey state return?

You can deduct property taxes as an itemized deduction on your federal return, but New Jersey does not allow a deduction for property taxes on the state return. However, New Jersey offers a separate Property Tax Relief Credit for homeowners and renters that may offset some of your property tax burden if you meet income limits.

How do I know if my withholding is correct?

Review your pay stub to see how much is being withheld for New Jersey state income tax. If you expect a large refund or to owe money when you file, your withholding may be off. You can adjust it by completing a new W-4 and submitting it to your employer. The Division of Taxation also offers a withholding calculator on its website to help you estimate the correct amount.