An Overview of New Jersey State Taxes
United States citizens have an obligation to pay their taxes every year. People aren’t just responsible for federal income taxes — which are the same nationwide — but state taxes as well.
Each state in the country has its own unique tax obligations in regard to things like income, sales, and estate taxes. New Jersey is no different and has its own tax structure. In fact, New Jersey is one of the least tax-friendly states in the nation.
If you live in New Jersey or are planning on moving there, it’s imperative that you familiarize yourself with the state’s taxes. This article will provide you with valuable New Jersey tax information that will help you file your taxes accurately and efficiently.
Table of Contents
NJ State Income Tax
Unlike some other states that have a flat rate tax — the same tax is imposed on everyone, regardless of their income — New Jersey has a progressive income tax. This system determines how much a New Jersey resident owes in taxes based on how much they earn in taxable income.
The tax brackets in New Jersey are as follows for individual filers and married couples filing jointly.
|$1 to $20,000||1.40%|
|$20,001 to $35,000||1.75%|
|$35,001 to $40,000||3.50%|
|$40,001 to $75,000||5.525%|
|$75,001 to $500,000||6.37%|
|$500,001 and up||8.97%|
For married couples filing jointly:
|$0 to $19,999||1.40%|
|$20,000 to $49,999||1.75%|
|$50,00 to $69,999||2.45%|
|$70,000 to $79,999||3.50%|
|$80,000 to $149,999||5.53%|
|$150,000 to $499,999||6.37%|
|$500,000 and up||8.97%|
Consult the New Jersey tax table to find your taxable income and tax rate based on filing status.
Income Tax Exemptions
New Jersey residents may take advantage of certain tax exemptions to cut back on the money they owe the government. Some of the most notable tax exemptions in New Jersey include:
- Regular exemption: You can claim a $1,000 regular exemption even if you are married or claimed by someone else as a dependent.
- 65 or older exemption: If you are 65 years of age or older, you may claim an additional $1,000 exemption. Your spouse can also claim an additional $1,000 exemption. To claim this, you must provide proof of your age.
- Blind or disabled exemption: If you are blind or disabled, you may claim an additional $1,000 exemption. Married New Jersey taxpayers can also claim this exemption for their blind or disabled spouses. Medical proof is required.
- Veteran exemption: If you’re a military veteran who was honorably discharged, you may claim a $6,000 exemption. If your spouse was also honorably discharged, they can claim this exemption as well. Certification that you were honorably released is required.
- Dependent child exemption: You may claim $1,500 for each dependent child on your taxes. The child’s Social Security number is required. You can claim the same $1,500 exemption for other dependents, such as a disabled family member.
- Dependent college student exemption: If you have a dependent who’s in college, you may claim a $1,000 exemption. You can’t claim this for yourself or anyone else who isn’t in college. The student must be a dependent under the age of 22 attending school full-time. Additionally, you must have paid half or more of the student’s tuition to qualify for this exemption.
Earned Income Tax Credit
The Earned Income Tax Credit (EITC) benefits low-income individuals and families in that it reduces how much these taxpayers owe the government. This tax credit will not affect those individuals who take advantage of the state’s food or cash assistance programs, Medicaid, or New Jersey public housing.
New Jersey Sales Tax
In New Jersey, the sales and use tax rate is 6.625%. This rate applies to any goods and services sold in New Jersey unless the law states otherwise.
Sales Tax Exemptions
There are many things that are exempt from sales tax in New Jersey. Some of the most common items sold in New Jersey are exempt from sales tax, including:
- Most clothing.
- Most food and drink items, except when they are sold by restaurants.
- Prescription drugs.
New Jersey Property Taxes
Each state’s local government administers property taxes. New Jersey property taxes are determined by the value of the property, or what a buyer is willing to pay for the purchase of a property. For example, the average property tax in Egg Harbor is $6,414.
The average effective property tax in New Jersey is 2.16%. If your property is valued at $200,000, your property taxes would be $4,320.
Property Tax Relief Programs
New Jersey has several property tax relief programs in place designed to help homeowners with the costs of their property taxes.
- Senior Freeze — This program reimburses senior citizens and disabled residents if their property taxes increase. Applicants must be 65 years or older, reside in New Jersey, own a home or mobile trailer, and meet the income requirements. Applications must be resubmitted every year.
- Property tax deduction for senior citizens — Residents over the age of 65 or disabled persons can receive an annual deduction of $250 on their property taxes if they meet the income and residency requirements in their municipality.
- Property tax credit or deduction — Some New Jersey residents qualify for a credit or deduction on their property taxes. The deduction reduces your taxable income, with the maximum being $10,000 for homeowners and 18% of rent payments for tenants. There is a property tax credit that can reduce tax liability by $50.
- Deduction for veterans — Qualified war veterans may be eligible for a $250 deduction on their property taxes. Surviving spouses or partners may also claim this deduction. In some cases, veterans or their surviving spouses may be exempt from property taxes.
New Jersey Estate Taxes
Inheritance taxes are those imposed on the person inheriting a decedent’s assets, while estate taxes are imposed on the transfer of property. In New Jersey, both taxes are in effect.
The inheritance tax in New Jersey is determined by your relationship to the decedent. Your class determines what you owe in taxes.
|Class A||No tax|
|Class C||Initial $25,000||No tax|
|$1,075,000 after that||11%|
|$300,000 after that||13%|
|$300,000 after that||14%|
|More than $1,700,000||16%|
|Class D||Initial $700,000||15%|
In regards to estate tax in New Jersey, the date of the person’s death determines what is owed. No estate tax is collected for people who died after 2017.
For deaths occurring after January 1, 2017, but before January 1, 2018, the state uses a graduated tax rate ranging from 0% to 16% on estates valued over $2 million.
For deaths occurring after December 31, 2001, but before January 1, 2017, estate tax is calculated based on whether the estate is worth more than $675,000.
Tips for Filing Taxes in New Jersey
Federal tax returns are due each year on April 15. In New Jersey, your local property tax may have its own due date. It’s important to review the due dates of your taxes as well as any credits or exemptions that you might qualify for. Refer to these helpful resources when preparing your taxes:
- Electronically file your taxes online using New Jersey’s E-File Individual Income Tax Returns.
- If you need help with your taxes, New Jersey has free tax preparation for low-income and disabled taxpayers that offers fast processing so you can get your return sooner.
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This post was updated January 30, 2020. It was originally published January 30, 2020.