New Jersey Tax Guide: What You’ll Pay in 2023 

Posted on 09/19/23 by Natalie Missakian

En español | New Jerseyans pay some of the country’s highest property and income tax rates, but the sales tax falls in the middle compared with other states, and there are numerous tax breaks for older adults. Though there’s no tax on Social Security, the Garden State does tax inheritances and most pensions.

The big picture:

  • Income tax: 1.4 percent to 10.75 percent
    There are seven tax brackets for single filers in New Jersey (eight for joint filers), ranging from 1.4 percent to 10.75 percent. 
  • Property tax: 2.23 percent of a home’s assessed value (average)
    New Jersey has the highest average property tax rate in the U.S. at 2.23 percent of a home’s assessed value in 2021, according to the Tax Foundation. Taxes vary widely by county and municipality.
  • Sales tax: 6.6 percent (combined state and local average)
    The state levies a 6.625 percent sales tax on goods and services, and there are no local sales taxes. However, some retailers in economically distressed cities are permitted to collect half the sales tax rate. 

How is income taxed in New Jersey?

New Jersey residents must file state taxes if they earned more than $10,000 individually or $20,000 if married filing jointly. There are seven brackets for single filers and eight for those who file jointly: 

Single filers:

Income*Tax rate
$0 to $20,0001.4 percent
$20,001 to $35,0001.75 percent
$35,001 to $40,0003.5 percent
$40,001 to $75,0005.525 percent
$75,001 to $500,0006.37 percent
$500,001 to $1 million8.97 percent
Over $1 million

Source: New Jersey Department of the Treasury

Joint filers:

Income*Tax rate
$0 to $20,0001.4 percent
$20,001 to $50,0001.75 percent
$50,001 to $70,0002.45 percent
$70,001 to $80,0003.5 percent
$80,001 to $150,0005.525 percent
$151,000 to $500,0006.37 percent
$500,001 to $1 million8.97 percent
Over $1 million10.75 percent

* Taxable income: Gross income (wages, tips, bonuses, etc.) after subtracting for itemized or standard deductions

Source: New Jersey Department of the Treasury

Not all of your income is taxed at the same rate. For example, if you’re a single filer and earned $75,000 in taxable income, the first $20,000 is taxed at 1.4 percent, the next $20,001 to $35,000 is taxed at 1.75 percent, and so on. 

Watch the video below to learn how to identify your 2022 federal income tax brackets.

What Is My Tax Bracket?

Are pensions or retirement income taxed in New Jersey?

Pension and annuity income and IRA and 401(k) withdrawals are taxable in New Jersey, with a few exceptions. See the New Jersey retirement income tax bulletin for more information.

Taxpayers who are 62 and older or have a disability, and whose total income is $150,000 or less, can exclude all or part of their retirement income. The amount of the exclusion depends on your income and filing status.

In some cases, the taxable amount you report for state tax purposes may be different from what appears on your federal return. For more information on how to calculate your taxable retirement income, visit the New Jersey Division of Taxation website.

AARP's Retirement Calculator can help you determine if you are saving enough to retire when — and how — you want.

What about investment income?

Most investment income is taxed as regular income in New Jersey, but there are exceptions. For instance, interest earned on government bonds or tuition savings programs isn’t taxable. Check the state’s guide to nontaxable investment income for more information.

Does New Jersey tax Social Security benefits?

No. But you may pay federal taxes on a portion of your Social Security benefits, depending on your income. Up to 50 percent of your benefits will be taxed if you file an individual tax return and make $25,000 to $34,000 in total income — or if you file jointly and as a couple make $32,000 to $44,000 in total income. Up to 85 percent of your benefits will be taxed by the federal government if your total income is more than $34,000 individually or $44,000 as a couple.

AARP's Social Security Calculator can assist you in determining when to claim and how to maximize your Social Security benefits.

How is property taxed in New Jersey?

Property tax in New Jersey is a local tax that’s based on the value of your home, which is assessed annually by assessors in each municipality. The average property tax rate is 2.23 percent of the assessed value of your home, which is the highest rate in the country. 

In New Jersey, counties decide what percentage of a home’s value is assessed, and all have chosen 100 percent of the home’s market value, according to the New Jersey Division of Taxation.

Residents of Bergen, Essex, Hunterdon, Morris, Passaic and Union counties pay some of the nation’s highest property taxes; they are among just 11 counties in the U.S. where the median property tax bill topped $10,000 in 2021, according to the Tax Foundation.

Find out more about how property taxes are calculated, whether you qualify for property tax relief, and how to appeal your assessment, on the New Jersey Division of Taxation’s website

What about sales and other taxes?

  • Sales and use tax: New Jersey levies a 6.625 percent sales and use tax on most consumer goods, as well as some digital products and services. There are no local sales taxes, but retailers in some cities may charge half the state tax rate, resulting in a combined statewide average of 6.6 percent, according to the Tax Foundation. That puts New Jersey in the middle of the pack compared with other states.
  • Groceries, clothing, prescription and over-the-counter drugs and paper products for household use, such as toilet paper and napkins, are exempt. See the New Jersey Sales Tax Guide for more information.

  • Use tax: You’ll owe use tax if you bought a taxable item or service outside the state and didn’t pay sales tax, or paid sales tax at a lower rate than New Jersey’s. This includes items purchased in person, online, or by mail and brought or shipped to New Jersey. The use tax rate is the same as the sales tax.
  • Gas tax: Drivers in New Jersey pay an additional 41.4 cents a gallon at the pump for gas. The tax on diesel fuel is 48.4 cents a gallon. The total is a combination of two taxes — the Motor Fuels Tax and the Petroleum Products Gross Receipts Tax. The state, which sets the rate annually, will raise the gas tax by 0.9 cents a gallon on Oct. 1, 2023. That will bring the total to 42.3 cents a gallon for gasoline and 49.3 cents a gallon for diesel. Gasoline is exempt from sales tax.
  • Alcohol taxes: New Jersey taxes beer at 12 cents a gallon, wine at 87.5 cents a gallon and liquor at $5.50 a gallon. These taxes are paid by the manufacturer, but some or all may be included in the retail price. Alcoholic beverages are also subject to sales tax.
  • Lottery: The state taxes New Jersey Lottery winnings exceeding $10,000. Taxability is determined by the individual prize, not the cumulative amount of lottery winnings during the year. The state taxation division has more information.

Will I or my heirs have to pay inheritance or estate tax?

New Jersey phased out its estate tax in 2018, but the Garden State continues to levy an inheritance tax. The tax rate your heirs will pay depends on the size of the inheritance and their relationship to you. 

For example, some immediate family members (including spouses, domestic partners, children, stepchildren, parents, grandparents and grandchildren) are exempt. Siblings, sons-in-law and daughters-in-law must pay a tax ranging from 11 to 16 percent on inheritances that exceed $25,000. 

Nieces, nephews, cousins, friends and most other heirs are taxed 15 to 16 percent on inheritances of $500 or more.

Are there any tax breaks for older New Jersey residents?

New Jersey offers several tax relief programs for older residents and retirees:

  • Property tax: The Senior Freeze Program reimburses eligible adults 65 and older for property tax increases on their primary home. In 2024, New Jersey will raise the income limit to qualify (from $99,735 to $150,000) and will no longer require applicants to have 10 consecutive years of state residency. Check the New Jersey Division of Taxation website to see if you’re eligible and find answers to frequently asked questions

    If you’re 65 and older or have a disability and have been a New Jersey resident for at least a year, you may be eligible for a $250 property tax deduction. Surviving spouses 55 or older may also qualify. If you’re a veteran, there are additional tax breaks.

    Homeowners of any age with incomes up to $250,000, and renters with incomes up to $150,000, may qualify for a property tax rebate of up to $1,500 a year through the state’s ANCHOR (Affordable New Jersey Communities for Homeowners and Renters) program. Starting in 2023, most qualified residents will be enrolled automatically. Find more information on the New Jersey Division of Taxation website.
  • Income tax: If you were 65 or older on the last day of the year for which you’re filing, you’re eligible for a $1,000 income tax exemption.

    New Jersey has also expanded eligibility for its Earned Income Tax Credit (EITC) to include those 65 and older who do not have a dependent. Visit the New Jersey Division of Taxation website for details and to see if you qualify.

    Taxpayers 62 and older whose total income is no more than $150,000 are exempt from paying taxes on some or all of their retirement income. Find more information on the New Jersey Division of Taxation website.

Are military benefits taxed in New Jersey? 

New Jersey does not tax military pensions or survivor’s benefits, and honorably discharged veterans are eligible for an additional $6,000 exemption of their state income tax.  

Military pay is taxable for New Jersey residents, even when stationed out of state. Combat pay has been exempt since tax year 2021.  

If New Jersey wasn’t your permanent home when you entered the service, you’re not considered a resident for tax purposes, even if you are stationed in the state.  For more information about taxes on military benefits, visit the New Jersey Division of Taxation website.

What is the deadline for filing New Jersey taxes in 2023? 

The deadline to file a New Jersey state tax return was April 18, 2023, which was also the deadline for federal tax returns. For help estimating your annual income taxes, use AARP's Tax Calculator. 

The deadline to file for a six-month extension (until Oct. 16, 2023) has also passed. For details on how to file for future tax years, visit the New Jersey Division of Taxation website. You must request the extension on or before the original tax filing deadline and pay at least 80 percent of any taxes owed by that date to avoid a late filing penalty

Next year's filing deadline is expected to be April 15, 2024. Check back for more information when it becomes available.

This guide was updated on Sept. 19, 2023 with new information about taxes in New Jersey. It was first published on Feb. 23, 2023.

Also of Interest:

Natalie Missakian is a contributing writer who covers federal and state policy. She previously worked as a reporter for the New Haven Register and daily newspapers in Ohio. Her work has also appeared in the AARP Bulletin and the Hartford Business Journal.

    This story is provided by AARP New Jersey. Visit the AARP New Jersey page for more news, events, and programs affecting retirement, health care, and more.

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