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.
New Jersey has one of the highest state tax levels in the US. According to a 2023 study, New Jersey has the fourth highest marginal tax rate at 10.75 percent, with only California, Hawaii, and New York having higher levels.
It’s not just income taxes that are high. 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, in 2022, was found to be the second-best state to live in.
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 percent to 10.75 percent, 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 percent 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 percent, 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 percent – well above the national average of 0.99 percent.
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 percent.
New Jersey motor tax
Cars in New Jersey are subject to sales tax at the state’s normal rate of 6.25 percent.
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.