What New Jersey taxes you on

New Jersey taxes income, sales, and property. The state income tax applies to wages, self-employment earnings, and investment income. Sales tax is charged on most goods and some services at the point of purchase. Property tax is assessed annually on real estate and is the largest tax bill most homeowners pay.

New Jersey has no tax on retirement income if you are 62 or older, which is one reason the state attracts retirees. However, this exemption does not explore to wages or self-employment earnings, only to pensions, Social Security, and investment returns from retirement accounts.

The state also taxes corporations, inheritances, and certain transfers of property, but those fall outside what most residents encounter directly.

Key Takeaways

  • New Jersey income tax rates range from 1.4% to 10.75% depending on your income level, with higher earners paying the top rate.
  • Sales tax in New Jersey is 6.625%, though some counties add a local option tax that raises it to 7% or higher.
  • Property tax is set by your municipality and county, not the state, so the amount you owe depends entirely on where you live.
  • Retirement income is exempt from state income tax if you are 62 or older, but only income from pensions, Social Security, and retirement accounts qualifies.
  • You file state income tax using Form NJ-1040 if you earned income in New Jersey or lived there for part of the year.

New Jersey income tax brackets and rates

New Jersey income tax is progressive, 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 within each bracket. The state has nine tax brackets ranging from 1.4% on the lowest incomes to 10.75% on incomes over $1 million.

As of 2024, a single filer earning $25,000 pays 1.4% on that income. A single filer earning $100,000 pays 1.4% on the first portion, then higher percentages on each bracket above that, resulting in an effective rate lower than 10.75%. The brackets adjust slightly each year for inflation.

New Jersey also taxes capital gains—profit from selling stocks, real estate, or other investments—at the same rates as ordinary income. Long-term capital gains (held over one year) receive no special rate reduction in New Jersey, unlike federal tax.

Sales tax: what you pay at checkout

The state sales tax rate is 6.625%. However, some counties have added a local option sales tax, raising the total to 7% or higher in those areas. Bergen County, Essex County, and Hudson County are among those with the higher rate. You can check your county's rate on the New Jersey Division of Taxation website.

Groceries, prescription medications, and medical devices are exempt from sales tax. Clothing and footwear under $110 per item are also exempt. Restaurant meals, prepared foods, and alcohol are taxed. Services like haircuts, repairs, and professional fees are generally not taxed, though there are exceptions.

If you buy something online from a seller with a physical presence in New Jersey, sales tax is charged. Out-of-state sellers may or may not charge New Jersey sales tax depending on their policies and the current law, which changes periodically.

Property tax: the largest tax bill for homeowners

Property tax in New Jersey is set by your municipality and county, not by the state. This means the amount you owe depends almost entirely on where you live. A home worth $400,000 in one town might carry a property tax bill of $6,000 per year, while the same home in another town could be $10,000 or more.

Your property tax bill is calculated by multiplying your home's assessed value by the local tax rate. The assessment is supposed to reflect the market value of your property, but assessments lag behind actual sales prices in many areas. You can challenge your assessment if you believe it is too high, though the process varies by municipality.

New Jersey offers property tax relief programs for homeowners 65 and older, disabled homeowners, and low-income residents. The Homestead Property Tax Deduction and the Senior Freeze program are the most common. These reduce your tax bill or freeze it at a prior year's amount, but you must meet income and property value limits.

Who files a New Jersey state tax return

You must file a New Jersey state income tax return if you earned income in the state or lived there for any part of the tax year. This includes W-2 wages, self-employment income, rental income, and investment income. If you lived in New Jersey for the full year and earned more than the standard deduction, you file. If you moved in or out during the year, you still file.

New Jersey residents who work in another state may owe tax to both states, though New Jersey offers a credit for taxes paid to other states to prevent double taxation. If you are a part-year resident, you report only the income earned while you lived in New Jersey.

The filing important date is the same as federal tax: April 15 of the following year. You file using Form NJ-1040 and can file electronically through the Division of Taxation's website or through a tax preparer.

Retirement income exemption

If you are 62 or older, New Jersey exempts certain retirement income from state income tax. This includes distributions from pensions, annuities, and retirement accounts like IRAs and 401(k)s. Social Security benefits are also exempt. However, the exemption applies only to retirement income, not to wages you earn from working.

If you are 62 and still working, you pay income tax on your wages at the normal rates. Only the portion of your income that comes from a pension or retirement account is exempt. There is no income limit for the exemption—even high-income retirees may have access to.

You claim the exemption on your tax return by excluding the may have access to income from your taxable income. You still report it on the return, but it does not count toward your tax liability.

Deductions and credits available to New Jersey taxpayers

New Jersey allows a standard deduction similar to the federal deduction, which reduces your taxable income. For 2024, the standard deduction is $12,850 for single filers and $25,700 for married couples filing jointly. If you are 65 or older, the standard deduction is higher.

The state also offers the Earned Income Tax Credit (EITC) for low- to moderate-income workers, which can result in a refund even if you owe no tax. The amount depends on your income and family size. New Jersey's EITC is separate from the federal EITC, and you can claim both.

Property tax deductions and credits are available through programs like the Homestead Property Tax Deduction and the Senior Freeze, which reduce your property tax bill directly rather than reducing your income tax. These are claimed through your municipality, not on your income tax return.

How to pay New Jersey taxes

If you are an employee, your employer withholds state income tax from your paycheck based on the W-4 form you complete. The withheld amount is sent to the state on your behalf. If you are self-employed or have income not subject to withholding, you may need to make estimated tax payments four times per year.

Sales tax is collected by retailers at the point of sale and remitted to the state. You do not pay it separately—it is added to your bill. Property tax is paid directly to your municipality, usually in installments. Most municipalities accept online payment, check, or automatic bank transfer.

If you owe additional tax when you file your return, you can pay online through the Division of Taxation website, by mail, or through your tax preparer. If you are owed a refund, you can choose direct deposit or a check.

Frequently Asked Questions

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

Yes, you owe New Jersey income tax on wages earned in the state, regardless of where you live. However, you may also owe tax to your home state. Most states offer a credit for taxes paid to other states to prevent paying twice on the same income. File returns in both states and claim the credit on your home state return.

Is Social Security taxed in New Jersey?

No, Social Security is exempt from New Jersey income tax for all recipients, regardless of age or income. You do not report it on your state return. However, it may still be subject to federal income tax depending on your total income.

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

The Division of Taxation can assess penalties and interest on unpaid taxes. If you are owed a refund, you cannot claim it without filing. The state can also place a lien on your property or garnish wages. If you believe you do not owe tax, filing anyway protects you from penalties and ensures you receive any refund due.

Can I deduct federal income tax from my New Jersey state taxes?

No, New Jersey does not allow a deduction for federal income tax paid. You use the standard deduction or itemize deductions on your federal return, but New Jersey has its own standard deduction that is not affected by federal taxes.

How do I know if my property assessment is correct?

Compare your assessed value to recent sales prices of similar homes in your area. Your municipality publishes assessment data, and you can also check county records. If your assessment seems too high, file a challenge with your municipality's tax assessor before the important date, which varies by town but is usually in the spring.