New Jersey's income tax rates for 2024
New Jersey has a progressive income tax system, meaning the rate you pay depends on how much you earn. The state taxes income in six brackets, ranging from 1.4% on the lowest earners to 10.75% on the highest. If you earn $20,000 a year, you pay a different rate than someone earning $200,000.
The brackets shift slightly each year based on inflation. For 2024, the top rate of 10.75% applies to single filers earning over $500,000 and married couples filing jointly earning over $750,000. The lowest rate of 1.4% applies to single filers earning under $20,000 and married couples earning under $30,000. The middle brackets fall between these two points.
New Jersey also taxes retirement income differently depending on the source. Social Security benefits are not taxed by the state. Pension income and withdrawals from retirement accounts like IRAs and 401(k)s are taxed as regular income, though some retirees may may have access to for a pension exclusion if they meet age and income requirements.
Key Takeaways
- New Jersey income tax ranges from 1.4% to 10.75% depending on your income level, with six tax brackets total.
- Social Security benefits are not subject to New Jersey state income tax, but pension and retirement account withdrawals are taxed as regular income.
- The income thresholds for each bracket change yearly to account for inflation, so your rate may shift even if your salary stays the same.
- New Jersey's sales tax is 6.625% statewide, though some counties add a local tax that raises the total to 7% or higher.
- Property tax in New Jersey is among the highest in the nation and is set by individual municipalities, not the state.
Sales tax in New Jersey
The statewide sales tax rate is 6.625%. However, some counties add a local sales tax on top of this, which can raise your total to 7% or higher depending on where you shop. Bergen County, for example, has a combined rate of 7.625%, while some other areas stay at the base 6.625%.
Not everything is taxed at the sales tax rate. Groceries, prescription medications, and most clothing items under $110 are exempt from sales tax. Restaurant meals, prepared foods, and non-prescription items are taxed. If you buy something online from a New Jersey seller, sales tax applies. Out-of-state sellers may or may not collect it depending on their business structure.
Property tax rates by municipality
New Jersey does not set a statewide property tax rate. Instead, each municipality sets its own rate based on local spending needs. This means your property tax bill depends entirely on where your home is located. A house worth $400,000 in one town might have a very different tax bill than the same house in another town just a few miles away.
Property taxes in New Jersey are generally higher than the national average. The state collects property tax through county assessors who determine the assessed value of your home, and then your municipality applies its tax rate to that value. You receive a property tax bill from your local tax assessor's office, not from the state.
Some homeowners may reduce their property tax through exemptions or credits. Senior citizens, disabled persons, and veterans may be may be able to access for property tax deductions or credits, though the rules vary by municipality. You would need to contact your local assessor's office to learn what programs exist in your area.
How New Jersey compares to other states
New Jersey's income tax is moderate compared to other states. Some states have no income tax at all, while others charge rates above 13%. New Jersey's top rate of 10.75% falls in the middle range nationally. However, when combined with property tax and sales tax, New Jersey residents often pay a higher total tax burden than residents of other states.
The state's property tax is notably high. New Jersey consistently ranks among the top states for property tax as a percentage of home value. This is one reason many residents focus on property tax relief programs when they own a home.
Tax credits and deductions available to New Jersey residents
New Jersey offers several tax credits that can reduce what you owe. The Earned Income Tax Credit (EITC) is available to lower-income working families and can result in a refund even if you owe no tax. The state also offers a Child and Dependent Care Credit for families paying for childcare while they work.
Homeowners may deduct property taxes paid on their federal return, though this deduction is capped at $10,000 per year under current federal rules. New Jersey does not offer a separate state-level property tax deduction, but some residents may have access to for property tax relief through programs like the Homestead Property Tax Credit if they meet income and age requirements.
If you are self-employed or own a business in New Jersey, you may owe the state's gross income tax in addition to income tax. The rules for business taxation are complex and depend on your business structure, so consulting a tax professional is often necessary.
When and how to file New Jersey taxes
New Jersey follows the federal tax calendar. Your state income tax return is due on the same day as your federal return, typically April 15. You file through the New Jersey Division of Taxation, either by mail or electronically through the state's online system.
If you file your federal return electronically, you can also file your state return electronically, which is faster and reduces errors. The state offers free tax preparation help through the Volunteer Income Tax information (VITA) program if your household income is below a certain threshold. You can find a VITA site near you through the IRS website.
If you owe New Jersey taxes and cannot pay by the important date, you can request a payment plan through the Division of Taxation. Interest and penalties explore to unpaid taxes, so contacting the state early is better than waiting.
Frequently Asked Questions
Do I have to pay New Jersey income tax if I work in New Jersey but live in another state?
Yes, if you earn income in New Jersey, you generally owe New Jersey income tax on that income regardless of where you live. However, you may be able to claim a credit on your home state's return to avoid double taxation. The rules vary by state, so check with both states' tax agencies.
Is there a New Jersey tax on retirement income?
Social Security is not taxed. Pensions and retirement account withdrawals are taxed as regular income. Some retirees over age 62 with pension income below certain thresholds may exclude up to $100,000 of pension income, but this requires meeting specific conditions. Contact the Division of Taxation to see if you may have access to.
What is the difference between assessed value and market value for property tax?
Market value is what your home would sell for today. Assessed value is what your municipality estimates for tax purposes, which is often lower. Your property tax is calculated on the assessed value, not the market value. You can appeal your assessment if you believe it is too high.
Can I deduct New Jersey property taxes on my federal return?
Yes, but only up to $10,000 per year under current federal rules. This cap applies to all state and local taxes combined (income, sales, and property), so if you pay high state income tax, your property tax deduction may be limited or eliminated.
Where do I find my local property tax rate?
Contact your municipal tax assessor's office directly. They can tell you the exact rate for your town and explain how it is calculated. You can also find this information on your property tax bill or your municipality's website.