Yes, New Jersey has a state income tax

New Jersey taxes the income of residents and nonresidents who earn money within the state. The state income tax rate ranges from 1.4% to 10.75%, depending on your income level. Unlike some states, New Jersey does not have a flat tax — the more you earn, the higher your rate.

The state also taxes certain types of income differently. Wages, salaries, and self-employment income are taxed at the standard rates. Capital gains — money from selling stocks or property — are taxed at a separate rate of 3.876%. Retirement income, including pensions and Social Security, receives different treatment depending on your age and total income.

Key Takeaways

  • New Jersey's income tax rates range from 1.4% to 10.75% and are based on your total income for the year.
  • You must file a New Jersey tax return if you earned income in the state, even if you live elsewhere.
  • Social Security benefits are not taxed by New Jersey, and pension income has special rules based on your age.
  • The state taxes capital gains at 3.876%, which is separate from your regular income tax rate.

The eight tax brackets and what they mean

New Jersey uses eight income tax brackets. Each bracket applies to a range of income, and you only pay the higher rate on money that falls within that bracket — not on your entire income. For example, if you earn $50,000, you do not pay the top rate on all of it; you pay the lower rates on the lower portions first.

The brackets change each year because they are adjusted for inflation. The lowest bracket starts at 1.4% on income below a certain threshold, and the highest bracket reaches 10.75% on income above a much higher threshold. Your actual tax bill depends on where your total income falls across these brackets. You can find the current year's brackets on the New Jersey Division of Taxation website, which updates them annually.

Who has to file a New Jersey tax return

You must file a New Jersey return if you are a resident and earned income during the year, regardless of the amount. Nonresidents who earned income in New Jersey must also file, even if they live in another state. The state defines a resident as someone who lived in New Jersey for more than 183 days during the tax year, or someone who maintained a permanent home there.

Some people are required to file even if they had no income — for example, if you received unemployment benefits or had tax withheld from your pay. If you are unsure whether you must file, the Division of Taxation publishes a filing requirement chart that walks through different income sources and situations.

How Social Security and retirement income are treated

New Jersey does not tax Social Security benefits, regardless of your income level. This is one of the few income sources that receives complete protection from state tax. If Social Security is your only income, you will not owe New Jersey income tax on it.

Pension income is taxed differently depending on your age. If you are 62 or older, you may be able to exclude some or all of your pension income from taxation, up to a certain amount. Military pensions, federal employee pensions, and some other government pensions have their own rules. If you receive a pension, you should review the Division of Taxation's pension exclusion guidelines or speak with a tax preparer, because the rules are specific to the type of pension and your age.

Capital gains tax and investment income

New Jersey taxes capital gains — the profit you make when you sell stocks, bonds, real estate, or other investments — at a flat rate of 3.876%. This rate applies regardless of your income level or how long you held the investment. The capital gains tax is separate from your regular income tax, so you calculate it independently.

Dividends and interest from investments are taxed as ordinary income at your regular bracket rate, not at the capital gains rate. This means a dividend might be taxed at 5.5% while a capital gain from the same investment is taxed at 3.876%. If you have significant investment income, understanding which type of income you have is important for calculating what you owe.

Tax credits and deductions available to New Jersey residents

New Jersey offers several tax credits that can reduce the amount you owe. The Earned Income Tax Credit (EITC) is available to low- and moderate-income workers and is often larger than the federal EITC. The state also offers credits for property tax paid, rent paid, and childcare expenses. Some credits are refundable, meaning you can receive money back even if you owe no tax.

The standard deduction — the amount of income you can earn without owing tax — varies by filing status and age. For 2024, the standard deduction ranges from about $10,000 for single filers to about $20,000 for married couples filing jointly. If you are 65 or older, your standard deduction is higher. You can also itemize deductions if your expenses are greater than the standard deduction, though New Jersey limits some deductions that the federal government allows.

How to file and where to send your return

You can file your New Jersey return electronically through the Division of Taxation's website or through a tax preparation software that supports New Jersey returns. Electronic filing is faster and reduces errors. If you file by mail, you send your return to the address listed in the tax form instructions — the address changes based on your filing status and situation.

The deadline to file is typically April 15, the same as the federal deadline. If you need more time, you can request an extension, which gives you until October 15 to file. An extension to file is not an extension to pay; if you owe tax, you should pay by April 15 to avoid penalties and interest, even if you file your return later.

Frequently Asked Questions

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

Yes. New Jersey taxes nonresidents on income earned within the state. You will owe New Jersey tax on your wages, self-employment income, and other earnings from work done in New Jersey. You may also owe tax to your home state, so you could face tax in both places. Some states have reciprocal agreements that prevent double taxation, but you should check with both states' tax agencies.

Is New Jersey income tax deductible on my federal return?

You can deduct New Jersey state income tax on your federal return, but only if you itemize deductions instead of taking the standard deduction. The federal government also caps the total deduction for state and local taxes (SALT) at $10,000 per year. If you pay more than $10,000 in New Jersey income tax plus property tax and sales tax combined, you can only deduct $10,000 on your federal return.

What happens if I do not file a New Jersey tax return when I am required to?

The Division of Taxation can assess penalties and interest on unpaid taxes. The penalty for not filing is usually 5% of the unpaid tax per month, up to 25%. Interest accrues daily on any tax owed. If you missed a filing deadline, you should file as soon as possible to minimize penalties. The Division may also contact you if they believe you owe tax based on income reported by employers or other sources.

Can I file my New Jersey return if I do not have a Social Security number?

You need either a Social Security number or an Individual Taxpayer Identification Number (ITIN) to file. If you do not have a Social Security number, you can apply for an ITIN through the IRS. Once you have an ITIN, you can use it on your New Jersey return. Nonresidents and undocumented immigrants can file using an ITIN.