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New Jersey Income Tax (2024)

Quick Reference

Single Filers

  • 1.40% on income up to $20,000
  • 1.75% on income $20,001 to $35,000
  • 3.50% on income $35,001 to $40,000
  • 5.525% on income $40,001 to $75,000
  • 6.37% on income $75,001 to $500,000
  • 8.97% on income $500,001 to $1,000,000
  • 10.75% on income over $1,000,000

Married Filing Jointly and Qualifying Surviving Spouse

  • 1.40% on income up to $20,000
  • 1.75% on income $20,001 to $50,000
  • 2.45% on income $50,001 to $70,000
  • 3.50% on income $70,001 to $80,000
  • 5.525% on income $80,001 to $150,000
  • 6.37% on income $150,001 to $500,000
  • 8.97% on income $500,001 to $1,000,000
  • 10.75% on income over $1,000,000

Married Filing Separately

  • 1.40% on income up to $20,000
  • 1.75% on income $20,001 to $25,000
  • 2.45% on income $25,001 to $35,000
  • 3.50% on income $35,001 to $40,000
  • 5.525% on income $40,001 to $75,000
  • 6.37% on income $75,001 to $250,000
  • 8.97% on income $250,001 to $500,000
  • 10.75% on income over $500,000

Head of Household

  • 1.40% on income up to $20,000
  • 1.75% on income $20,001 to $50,000
  • 3.50% on income $50,001 to $70,000
  • 5.525% on income $70,001 to $80,000
  • 6.37% on income $80,001 to $500,000
  • 8.97% on income $500,001 to $1,000,000
  • 10.75% on income over $1,000,000

Details

Tax Computation

NJ uses federal gross income as starting point (not AGI):

  1. Start with federal gross income (from federal Form 1040, line 9)
  2. Add NJ additions
  3. Subtract NJ exclusions
  4. Result = NJ gross income
  5. Subtract NJ deductions
  6. Subtract personal exemptions
  7. Result = NJ taxable income
  8. Apply tax rates above
  9. Subtract credits
  10. Result = NJ tax liability

NJ Additions to Federal Gross Income

Common additions:

Other state and local bond interest: - Interest from non-NJ state and local bonds - Exempt from federal tax but taxable for NJ

Certain pension income: - If excluded for federal purposes but not qualifying for NJ exclusion - Some military pensions (depending on service dates)

Certain capital gains: - Alternative depreciation adjustments - Differences in basis

Partnership and S corporation income: - Adjustments for federal vs. NJ differences

NJ Exclusions from Federal Gross Income

Qualified retirement income: - See retirement-income.md for full details - Pension income exclusions for seniors - IRA/401(k) exclusions (income limits apply)

Social Security benefits: - Fully exempt from NJ tax - Even if taxable for federal purposes

Unemployment compensation: - Fully exempt from NJ tax (unique to NJ) - Taxable for federal purposes

NJ lottery winnings: - Exempt from NJ tax - Other states' lottery winnings are taxable

US government bond interest: - Exempt from state tax

NJ Deductions

NJ does not allow most federal itemized deductions:

Medical expenses: - Allowed if exceed 2% of income (vs. 7.5% federal) - More generous than federal

Qualified conservation contribution: - 50% of contribution allowed as deduction - Special NJ provision

Health enterprise zone deduction: - For businesses in designated zones

Archer MSA contributions: - Allowed (follows federal)

Other deductions: - Alimony paid (for pre-2019 divorces) - Certain employee business expenses (limited)

NOT allowed: - State and local taxes (no SALT deduction) - Mortgage interest (not deductible) - Charitable contributions (not deductible) - Most other federal itemized deductions

Personal Exemptions

NJ has personal exemptions (unlike federal after 2017):

Basic exemptions (2024): - Single: $1,000 - Married Filing Jointly: $2,000 - Married Filing Separately: $1,000 - Head of Household: $1,000 - Qualifying Surviving Spouse: $2,000

Dependent exemptions: - $1,500 per dependent

Additional exemptions: - Age 65 or older: Additional $1,000 - Blind or disabled: Additional $1,000

Phase-out: - Exemptions phase out for high earners - Begins at $100,000 (varies by filing status) - Completely phased out at higher income levels

Capital Gains

No preferential rate - NJ taxes capital gains as ordinary income at full rates (1.40% to 10.75%).

Short-term vs. long-term: - No distinction for NJ - Both taxed at ordinary income rates

Installment sales: - Follow federal rules - Gain recognized as payments received

Millionaire's Tax

Enacted 2004, made permanent in 2009:

Rate: 10.75% on income over $1,000,000

Applies to all filing statuses: - Single: over $1,000,000 - MFJ: over $1,000,000 - MFS: over $500,000 - HOH: over $1,000,000

Revenue impact: - Significant revenue for state - Approximately 1% of filers pay millionaire's tax - Accounts for over 40% of income tax revenue

Migration concerns: - Some high earners relocate to avoid tax - FL and PA popular destinations - NJ monitors compliance with exit tax rules

Credits

NJ offers various credits:

Property tax credit: - For homeowners and tenants - Income limits apply - See property-tax.md for details

Earned income tax credit: - 40% of federal EITC - Refundable - Income limits same as federal

Child and dependent care credit: - Based on federal credit - Percentage varies by income

Sheltered workshop credit: - For employing individuals with disabilities

Veteran's credit: - $6,000 credit for qualifying veterans - $3,000 for unmarried surviving spouse/partner

College affordability credit: - For taxpayers paying higher education expenses - Income limits apply

Alternative Calculation

NJ allows alternative calculation for certain taxpayers:

Who can use: - Taxpayers with income from column A (wages, etc.) and column B (investment income, etc.) - May result in lower tax

Calculation: - Apply different rates to different types of income - Use tax table or tax rate schedule - Take lower of regular calculation or alternative

Not common: - Complex calculation - Software handles automatically - Rarely beneficial

Withholding

Employer withholding required:

Rates: - Graduated based on income - Employers use NJ-WT tables - Annual reconciliation on Form NJ-927

Nonresident withholding: - Must withhold for nonresidents working in NJ - Same rates as residents - Nonresident claims credit on home state return

Estimated tax: - Required if expect to owe $400 or more - Quarterly payments (April 15, June 15, September 15, January 15) - Form NJ-1040-ES

Safe harbor: - 90% of current year tax, OR - 110% of prior year tax (100% if prior year income under $150,000)

Part-Year Residents

Allocation of income:

Resident period: - All income taxed (worldwide)

Nonresident period: - Only NJ-source income taxed

Form NJ-1040NR: - Part-year residents use nonresident form - Columns for resident and nonresident periods - Prorate exemptions and deductions

Nonresident Taxation

NJ taxes nonresidents only on NJ-source income:

NJ-source income includes:

Wages for services in NJ: - Days worked in NJ - Allocation formula if partially in NJ - NJ does not have convenience of employer rule (unlike NY)

Business income: - Income from NJ trade or business - Partnership/S corp income from NJ entity

Rental income: - From NJ real property

Sale of real property: - Gain on sale of NJ real estate

Gambling winnings: - From NJ sources (casinos, racetracks)

Not NJ-source: - Investment income (unless from NJ business) - Wages for work performed outside NJ - Sale of stock (even if NJ company) - Pension income (even if from NJ employer)

PA Reciprocal Agreement

Wages only - NJ and PA have reciprocal agreement:

For wages: - NJ residents working in PA: not subject to PA tax, only NJ tax - PA residents working in NJ: not subject to NJ tax, only PA tax

Forms: - NJ resident in PA: file PA Form REV-419 with employer - PA resident in NJ: file NJ Form NJ-165 with employer

Limitations: - Wages only (not self-employment, business income, rental income) - Must actually perform services in the other state - No other reciprocal agreements (NY, CT, DE require credit method)

Tax calculation: - Report wages on resident state return only - Not reported to non-resident state

Citations

New Jersey Statutes: - N.J.S.A. 54A:2-1 - Imposition of tax; rate of tax - N.J.S.A. 54A:3-1 - Gross income defined - N.J.S.A. 54A:3-3 - Items not considered gross income - N.J.S.A. 54A:3-4 - Deductions from gross income - N.J.S.A. 54A:3-5 - Personal exemptions

Regulations: - N.J.A.C. 18:35-2.1 - Gross income defined - N.J.A.C. 18:35-3.1 - Deductions - N.J.A.C. 18:35-4.1 - Personal exemptions

NJ Division of Taxation: - Technical Bulletin TB-55 - Pension and Annuity Income - Bulletin GIT-1 - Gross Income Tax Information - https://www.state.nj.us/treasury/taxation/njit.shtml

Forms: - NJ-1040 - Resident Income Tax Return - NJ-1040NR - Nonresident Return - NJ-1040-ES - Estimated Tax Payment Voucher - NJ-WT - Employer Withholding Tax Return - Schedule A - Property Tax Deduction/Credit - NJ-165 - Employee Certificate of Nonresidence in New Jersey

Other: - NJ-PA Reciprocal Agreement - Instructions for Form NJ-1040 - New Jersey Income Tax rates and tables