New Jersey collects state income tax on wages, investment income, and other earnings
Yes, New Jersey has a state income tax. The state taxes wages, salaries, interest, dividends, capital gains, and other forms of income. New Jersey residents and nonresidents who earn income within the state must file a New Jersey tax return if their income exceeds the filing threshold for their filing status.
The state income tax is separate from federal income tax. You file both a federal return with the IRS and a state return with the New Jersey Division of Taxation. The tax rates and rules differ between the two systems, so your federal and state tax bills will not be the same amount.
Key Takeaways
- New Jersey taxes income at rates ranging from 1.4% to 10.75%, depending on your income level and filing status.
- You must file a New Jersey state return if your income exceeds the threshold for your filing status, even if you do not owe tax.
- New Jersey allows deductions for federal income tax paid, property taxes, and certain other expenses that reduce your taxable income.
- Nonresidents who work in New Jersey may owe state tax on wages earned within the state, even if they live elsewhere.
New Jersey tax rates and income brackets
New Jersey uses a progressive tax system, meaning the tax rate increases as your income rises. The state has nine tax brackets. The lowest rate is 1.4% on the first portion of income, and the highest rate is 10.75% on income above a certain threshold. The exact threshold depends on your filing status—single, married filing jointly, married filing separately, or head of household.
Tax brackets change each year based on inflation adjustments. The New Jersey Division of Taxation publishes updated brackets in January of each year. You can find the current year's brackets on the Division of Taxation website or on your tax forms.
Because brackets shift annually, your tax bill can change even if your income stays the same. A tax professional or the Division of Taxation can help you understand how the current brackets explore to your situation.
Who must file a New Jersey state return
You must file a New Jersey return if your income exceeds the filing threshold for your filing status. The threshold varies by age and filing status. For example, the threshold is lower for dependents than for independent filers, and it changes if you are 65 or older.
Even if you do not owe tax, you may need to file if your income is above the threshold. Filing can be required to claim refundable tax credits, such as the Earned Income Tax Credit (EITC) or the Property Tax Reimbursement (PTR) program. These credits can result in a refund even if no tax is owed.
Nonresidents who earned income in New Jersey during the year must also file a New Jersey return on that income, regardless of where they live. A nonresident is someone who did not live in New Jersey for the entire tax year.
Deductions and credits that lower your New Jersey tax
New Jersey allows you to deduct certain expenses from your income before calculating tax. The most common deduction is the amount of federal income tax you paid during the year. You can also deduct property taxes paid on real estate you own in New Jersey, up to a limit.
The state also offers tax credits that reduce the amount of tax owed. The Earned Income Tax Credit (EITC) is available to low- and moderate-income workers. The Property Tax Reimbursement (PTR) program provides credits to homeowners and renters whose property taxes or rent exceed a certain percentage of their income. Other credits exist for specific situations, such as education expenses or dependent care costs.
Deductions and credits are not the same. A deduction reduces your taxable income, while a credit reduces your tax bill directly. A $100 credit saves you more money than a $100 deduction.
How New Jersey taxes nonresidents
If you live outside New Jersey but earned income within the state, you owe New Jersey tax on that income. This applies to wages from a job in New Jersey, self-employment income from a business operated in the state, and certain other income sources tied to New Jersey.
Nonresidents file Form NJ-1040-NR, the nonresident return. You report only the income earned in New Jersey on this form, not income from other states or sources outside New Jersey. If you also lived in New Jersey for part of the year, you may file as a part-year resident instead, which has different rules.
If you worked in New Jersey and your employer withheld New Jersey tax from your paychecks, that withholding counts toward your state tax bill. You may receive a refund if too much was withheld, or you may owe additional tax if too little was withheld.
Filing important date and payment due dates
The New Jersey tax return is due on April 15 of the following year, the same date as the federal return. If April 15 falls on a weekend or holiday, the important date moves to the next business day. You can request an extension to file, which gives you until October 15 to submit your return, but taxes owed are still due by April 15.
If you owe tax, you must pay it by the April 15 important date to avoid penalties and interest. You can pay online through the Division of Taxation website, by mail, or through your tax preparer. Payments made after April 15 accrue interest at a rate set by the state, currently 8% per year.
If you file late or pay late, the state may assess penalties in addition to interest. The failure-to-file penalty is typically 5% of the unpaid tax per month, up to 25%. The failure-to-pay penalty is 0.5% per month, up to 25%.
Frequently Asked Questions
Do I have to pay New Jersey income tax if I just moved to the state?
You owe New Jersey tax on income earned after you move to the state. If you moved partway through the year, you file as a part-year resident and report only income earned while you lived in New Jersey. You may also owe tax to your previous state on income earned there before you moved.
Can I deduct federal income tax paid from my New Jersey return?
Yes. New Jersey allows you to deduct the federal income tax you paid during the year. This includes tax withheld from your paychecks and estimated tax payments you made. You report this deduction on your New Jersey return.
What happens if I do not file a New Jersey return when I am supposed to?
The state may assess penalties and interest on any unpaid tax. If you are owed a refund, you cannot receive it without filing. The state can also pursue collection action, including wage garnishment or bank levies, if tax remains unpaid for an extended period.
Is Social Security income taxed in New Jersey?
No. New Jersey does not tax Social Security benefits. However, other retirement income, such as distributions from IRAs, 401(k)s, and pensions, may be taxable depending on the source and your age. Military pensions and certain other retirement income have special rules.
Do I need to file if I only have investment income?
You must file if your total income, including investment income, exceeds the filing threshold for your status. Investment income includes interest, dividends, and capital gains. Even small amounts of investment income count toward the threshold.