Tax in New Jersey: a complete guide
If you’re looking to move to New Jersey or want to know more about its state taxes, here’s everything you need to know.
Summary
According to a 2023 study, New Jersey has the fourth highest marginal tax rate at 10.75%, behind California, Hawaii, and New York.
From property to sales tax and many others, many consider New Jersey a relatively high tax state.
In return for these high rates, however, the state has a high quality of life and was found to be the second-best state to live in in 2022.
New Jersey income taxes
In New Jersey, you must pay income tax whether you are a resident or earn income from a New Jersey source. New Jersey tax brackets range from 1.4% to 10.75%, depending on your filing status and income.
The state income tax thresholds are:
| New Jersey income | Up to | Tax rate |
|---|---|---|
| $0 | $20,000 | 1.4 percent |
| $20,001 | $35,000 | 1.75 percent of excess over $20,000, minus $70.00 |
| $35,001 | $40,000 | 3.5 percent of excess over $35,000, minus $682.50 |
| $40,001 | $75,000 | 5.52 percent of excess over $40,000, minus $1,492.50 |
| $75,001 | $500,000 | 6.37 percent of excess over $75,000, minus $2,126.25 |
| $500,001 | $1,000,000 | 8.975 of excess over $500,000, minus $12,126.25 |
| $1,000,001 | 10.75 percent of excess over $1,000,000, minus $32,926.25. |
As mentioned above, the top income tax bracket in New Jersey is the fourth highest bracket of any state, meaning your income taxes in New Jersey could be noticeably higher than in other states.
New Jersey sales taxes
The sales tax rate in New Jersey is 6.625% and applies to most products purchased in the state.
Certain exemptions apply to products like food, clothing, drugs, and manufacturing equipment. Sales tax also doesn’t apply to resale items. Moreover, the sales tax rate is halved in the specially designated Urban Enterprise Zone.
In addition to state-level sales tax, New Jersey also levies its own excise taxes on products like tobacco and alcohol. For tobacco, the state has some of the highest taxes in the country at $2.70 per pack, while excise taxes on beer are amongst the lowest in the country.
While New Jersey’s sales tax rate is slightly higher than the average, it is also some way from being the highest rate. California’s sales tax rate is the highest of all states, standing at 7.25%, while three states – Alaska, Oregon, and Montana – don’t charge any sales tax.
New Jersey property tax
When it comes to property taxes, New Jersey has the highest rate in the US – well above the average level.
State property taxes are calculated yearly, with revenues going toward local councils and their funding needs.
Different towns in New Jersey are given a general tax rate based on the value of all the properties within the town. An individual’s tax rate is then calculated by multiplying this general tax rate by the assessed value of the individual’s property. In other words, your property tax rate is decided by the value of your property and that of the town you are in. This system is designed to ensure that local councils' funding is spread as equitably as possible.
As an average, effective property tax rates come to around 2.26% – well above the national average of 0.99%.
New Jersey capital gains tax
New Jersey taxes capital gains at state level.
However, unlike the federal capital gains tax, it does not make a distinction between short- and long-term tax. Instead, it charges all capital gains as ordinary income.
The state uses the same brackets as its regular state income tax.
Alongside paying state capital gains tax, you will also have to pay federal capital gains tax. How much capital gains tax you pay will depend on your taxable income, your filing status, and how long you owned the asset before selling.
New Jersey estate taxes
Only 12 states levy estate taxes and New Jersey doesn’t have any estate taxes. However, this doesn’t mean that residents of this state don’t pay any estate tax whatsoever, as the federal government’s own estate tax rules still apply.
New Jersey does, however, levy an inheritance tax. It’s one of only six US states with a local inheritance tax. How much you pay depends on the relationship between the descendants and the deceased, but it can vary from 11% to 16%.
New Jersey motor tax
Cars in New Jersey are subject to sales tax at the state’s normal rate of 6.25%.
For gasoline and fuel, New Jersey’s taxes come to 15 cents per gallon of gas and 18 cents per gallon of diesel.
New Jersey retirement tax
New Jersey has a relatively friendly tax regime when it comes to retirement. Retirement income is taxed at your normal income tax rate. There are also several tax exemptions that can be beneficial for you. The following sources of income are non-taxable in New Jersey:
Social Security income
Railroad benefits
Pension benefits – only due to permanent and total disability before the age of 65
Military pensions
Survivor benefit pensions
When planning your federal and state-level taxes, it can be difficult to know your tax liability. Get your finances right by speaking to a dedicated financial advisor.
Senior Content Writer
Rachel is a Senior Content Writer at Unbiased. She has nearly a decade of experience writing and producing content across a range of different sectors.