New Jersey does not tax Social Security benefits

If you receive Social Security retirement, survivor, or disability benefits, New Jersey will not take state income tax from that money. This applies whether you live in New Jersey year-round or are a part-time resident. The state passed a law in 1989 that exempts all Social Security income from state taxation, and that exemption remains in place.

However, your Social Security benefits may still be taxable at the federal level, depending on your total income. The federal government uses a formula based on your combined income — which includes wages, pensions, interest, and half your Social Security benefits — to determine whether you owe federal tax on those benefits. New Jersey's exemption does not change your federal tax situation.

Key Takeaways

  • New Jersey does not tax Social Security retirement, survivor, or disability benefits under state law.
  • Federal income tax may still apply to your Social Security benefits depending on your combined income, even though New Jersey does not tax them.
  • You will receive a Form SSA-1099 each January showing your annual Social Security income for tax reporting purposes.
  • If you have other income sources in New Jersey, you may owe state tax on those even though your Social Security is exempt.

How federal taxation of Social Security works

The federal government taxes Social Security benefits using a "combined income" calculation. Combined income means your adjusted gross income plus nontaxable interest plus half of your Social Security benefits. If your combined income exceeds a certain threshold, a portion of your benefits becomes taxable at the federal level.

The thresholds depend on your filing status. For single filers, the first threshold is $25,000; for married filing jointly, it is $32,000. If your combined income falls between the first and second threshold, you may owe federal tax on up to 50 percent of your benefits. If your combined income exceeds the second threshold ($34,000 for single, $44,000 for married filing jointly), you may owe federal tax on up to 85 percent of your benefits.

These thresholds have not changed since 1993, so they affect more people now than when they were first set. You can estimate your federal tax liability using the Social Security Administration's online calculator or by consulting a tax preparer.

What documents you will receive and when

Each January, the Social Security Administration mails you a Form SSA-1099 showing the total benefits you received in the previous year. You use this form to report your Social Security income on your federal tax return. If you did not receive a Form SSA-1099 by early February, you can request one through your Social Security account online or by calling 1-800-772-1213.

You do not need to file the SSA-1099 with New Jersey because the state does not tax Social Security income. However, you must still file it with your federal return if you have any tax filing requirement at all.

Other income and New Jersey state taxes

While Social Security is exempt from New Jersey state tax, other income you receive is not. If you have wages, a pension, interest, dividends, or rental income, New Jersey will tax those at the state level. Your Social Security exemption applies only to Social Security itself.

New Jersey has a progressive income tax system with rates ranging from 1.4 percent to 10.75 percent depending on your income level and filing status. If you are retired and receiving both Social Security and a pension, only the pension portion is subject to New Jersey tax (though New Jersey does exempt some pension income for residents over 62 under certain conditions).

How to report Social Security on your New Jersey return

When you file your New Jersey state income tax return, you do not report Social Security benefits as income. New Jersey's tax forms do not include a line for Social Security because it is not taxable in the state. You only report income that is actually subject to New Jersey tax — wages, self-employment income, pensions, interest, and other sources.

If you use tax preparation software, the program will typically ask whether you received Social Security. When you enter that information, the software should automatically exclude it from your New Jersey taxable income while including it in your federal calculation. If you prepare your return by hand, simply omit Social Security from the income section of your New Jersey form.

Frequently Asked Questions

Will I owe New Jersey tax if I move to the state after receiving Social Security?

No. New Jersey does not tax Social Security benefits for anyone who receives them, regardless of when they moved to the state or where they were living when they started receiving benefits. The exemption applies to all residents and part-time residents.

Does the New Jersey Social Security exemption affect my federal tax return?

No. New Jersey's decision not to tax Social Security does not change how the federal government calculates your federal tax. You still use the combined income formula at the federal level, and you may still owe federal tax on a portion of your benefits depending on your total income.

What if I receive both Social Security and a pension?

Your Social Security is not taxed by New Jersey. Your pension is taxable by New Jersey unless you fall under a specific exemption. New Jersey exempts some pension income for residents age 62 and older, but the rules depend on your income level and the source of the pension. Consult a tax preparer or contact the New Jersey Division of Taxation for details about your situation.

Do I need to file a New Jersey return if my only income is Social Security?

Generally, no. If Social Security is your only income, you have no New Jersey tax filing requirement because Social Security is not taxable in the state. However, if you have other income — even a small amount of interest or a part-time job — you may have a filing requirement based on that income.