New Jersey collects income tax on wages, investments, and business earnings

New Jersey has a state income tax that applies to residents and part-year residents who earn money within the state. The tax is progressive, meaning the rate increases as your income goes up. You pay it through withholding from paychecks, quarterly estimated payments if you're self-employed, or a lump sum when you file your annual return with the New Jersey Division of Taxation.

The state uses tax brackets that change each year. For 2024, rates range from 1.4% on the lowest incomes to 10.75% on the highest. New Jersey also taxes investment income, retirement distributions, and business profits, though some types of income—like Social Security benefits for most residents—are exempt.

If you work in New Jersey but live elsewhere, or live in New Jersey but work in another state, you may owe tax to both states. New Jersey offers a credit for taxes paid to other states to prevent double taxation, but you need to understand which state has the right to tax your specific income.

Key Takeaways

  • New Jersey income tax rates range from 1.4% to 10.75% depending on your income level, and the brackets adjust annually.
  • You pay through paycheck withholding, quarterly estimated payments, or when you file your annual return with the New Jersey Division of Taxation.
  • Social Security benefits are not taxed in New Jersey for most residents, and certain retirement income has special treatment.
  • If you work in one state and live in another, you may owe tax to both, but New Jersey offers a credit to reduce double taxation.
  • Self-employed people and those with investment income must often make quarterly estimated tax payments rather than waiting until April.

New Jersey tax brackets and rates for 2024

New Jersey's income tax uses seven brackets. The lowest bracket starts at 1.4% for single filers earning up to $20,000, and the highest reaches 10.75% for single filers earning over $1 million. Married couples filing jointly have higher income thresholds before moving into each bracket—for example, the top rate applies to joint filers earning over $1.5 million.

The state adjusts these brackets and thresholds each January to account for inflation. This means the income level where you move into a higher bracket shifts slightly year to year. When you file your return or set up withholding, use the current year's brackets, not the previous year's.

New Jersey also has a Earned Income Tax Credit (EITC) for lower-income workers, which reduces the amount of tax you owe or increases your refund. The credit is based on your income, filing status, and number of dependents. You claim it when you file your return.

How paycheck withholding works in New Jersey

When you start a job in New Jersey, your employer uses a W-4 form to calculate how much state income tax to withhold from each paycheck. The withholding is based on your filing status, the number of dependents you claim, and any additional withholding you request. Your employer sends the withheld amount to the New Jersey Division of Taxation on your behalf.

If too much is withheld, you get a refund when you file your annual return. If too little is withheld, you owe the difference. You can adjust your withholding mid-year by submitting a new W-4 to your employer—for example, if you get married, have a child, or take a second job.

Some types of income are not subject to withholding. If you receive a 1099 form for freelance work, rental income, or investment gains, you are responsible for paying tax on that income through quarterly estimated payments or when you file your return.

Quarterly estimated tax payments for self-employed people

If you are self-employed, own a business, or have significant income that is not subject to withholding, 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 the estimated amount based on your expected annual income and the current tax brackets.

You can pay online through the New Jersey Division of Taxation website using their payment portal, by mail with a voucher, or through an authorized payment processor. If you underpay your estimated taxes, you may owe a penalty and interest when you file your annual return, even if you ultimately owe no tax.

Many self-employed people work with a tax professional to calculate the correct quarterly amount, especially if their income varies month to month. If your income drops unexpectedly, you can adjust your next quarterly payment downward.

Types of income that New Jersey taxes

New Jersey taxes wages and salaries from employment, self-employment income from your own business, investment income including interest and dividends, capital gains from selling stocks or property, and retirement distributions from IRAs and 401(k)s. You report these on your state return using the same income figures from your federal return.

Some income is partially or fully exempt. Social Security benefits are not taxed for most New Jersey residents. Pension income from military service, certain disability payments, and workers' compensation are also exempt. If you receive a distribution from a traditional IRA or 401(k), the full amount is taxable, but Roth IRA withdrawals of contributions (not earnings) are not.

Long-term capital gains—profits from selling an asset you held for more than one year—are taxed at your regular income tax rate in New Jersey, unlike the federal system which has preferential rates. Short-term gains (assets held one year or less) are also taxed as ordinary income.

Filing your New Jersey state tax return

You file your New Jersey state return using Form NJ-1040 or the short form NJ-1040-SR if you are 65 or older and meet income limits. The important date is typically April 15, the same as your federal return. You can file online through the New Jersey Division of Taxation's website, by mail, or through a tax professional.

When you file, you report all income from all sources, claim any deductions or credits you are may have access to to, and calculate the tax owed or the refund due. If you had too much withheld during the year, you receive a refund. If you underpaid, you owe the balance by the important date or you may face penalties and interest.

The New Jersey Division of Taxation offers free tax preparation help through the Volunteer Income Tax information (VITA) program if your income is below a certain threshold. You can also use commercial tax software or hire a tax professional to prepare your return.

Working across state lines and tax credits

If you live in New Jersey and work in another state, you typically owe tax to the state where you work on the wages you earn there. You then report that income on your New Jersey return and claim a credit for taxes paid to another state to avoid paying tax twice on the same income. The credit is limited to the lesser of the tax you paid to the other state or the New Jersey tax on that income.

If you live in another state and work in New Jersey, you owe New Jersey tax on your wages earned here. You may also owe tax to your home state, depending on that state's rules. Some states have reciprocal agreements with New Jersey that reduce or eliminate the tax owed to one state, but these are limited.

Part-year residents—people who moved to or from New Jersey during the year—must file a New Jersey return for the months they lived in the state. You report only the income earned while you were a resident, and you may claim a credit for taxes paid to another state during the months you lived elsewhere.

Frequently Asked Questions

Do I have to file a New Jersey tax return if I live there?

You must file if your income exceeds the filing threshold for your age and filing status. For 2024, a single person under 65 must file if they earned more than $10,000. If you had taxes withheld, you may want to file even if you are below the threshold to claim a refund or the Earned Income Tax Credit.

Is Social Security taxed in New Jersey?

No. Social Security benefits are not subject to New Jersey income tax for most residents. However, if you have other income above certain thresholds, a portion of your benefits may be taxable at the federal level—that is a federal rule, not a New Jersey one.

What happens if I move to New Jersey mid-year?

You file a part-year resident return and report only the income you earned while living in New Jersey. You claim a credit for any taxes paid to your previous state during the months you lived there. The New Jersey Division of Taxation website has worksheets to help you calculate the correct amount.

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

New Jersey does not allow a deduction for property taxes or mortgage interest on the state return. You can only claim the standard deduction or itemize deductions on your federal return. Some New Jersey residents may be may have access to to the Homestead Property Tax Deduction, which is a separate program that reduces your property tax bill.

What if I disagree with my New Jersey tax bill?

You can file a protest with the New Jersey Division of Taxation within 90 days of receiving the bill. The protest must explain why you believe the bill is wrong and include supporting documents. If you cannot resolve it through protest, you may request a hearing before the Tax Court.