The highest in the country, New Jersey’s steep property tax rate is something to consider. Sales taxes, however, are lower than average, which can help middle-class families and retirees save more. Below, we explain various New Jersey state taxes affecting retirement income, such as sales tax, inheritance tax, and property taxes.
For information regarding taxes in other states, see Retirement Taxes by State.
New Jersey Tax Rates
|State Sales Tax||5.50%|
|Avg State/Local Sales Tax||6.60%|
|Gas Tax||$0.42 per gallon|
|Diesel Tax||$0.49 per gallon|
|Cigarette Tax||$2.70 per pack|
|Effective Tax Rate:||6.20%|
|Social Security Tax||None|
|Federal Income Tax Deduction:||None|
New Jersey State Taxes Explained
New Jersey Sales Tax
6.63%. Food, prescription drugs and over-the-counter drugs, most medical equipment, clothing and footwear are exempt. The state sales tax is cut by 50% in designated Urban Enterprise Zones, which exist to stimulate local economies. Salem County also charges a reduced 3.313% rate.
New Jersey Income Taxes
Top rate of 10.75% (on taxable income over $1 million). Newark imposes an added payroll tax.
New Jersey Property Taxes
New Jersey’s effective property tax rate is 2.49% or $8,362 on the median home value of $335,600. The state offers a variety of property tax relief programs.
The New Jersey Senior Freeze Program reimburses seniors aged 65 and older and disabled persons for property tax or mobile home park site fees. Annual combined household income must be $94,178 or less (adjusts annually). For renters, 18% of rent paid during the year applies, but the final deduction depends on a number of factors.
New Jersey offers a $250 property tax deduction to senior homeowners. Gross income must be over $20,000 ($10,000 if filing separately or single), or you or your spouse must be 65 or older or blind or disabled on the last day of the tax year. Lower-income residents are eligible only if they meet the age or disability requirement.
Affordable New Jersey Communities for Homeowners and Renters (ANCHOR) program offers a tax credit for homeowners age 65 or older, or who are blind or disabled, with $150,000 or less in annual income. Otherwise, the income requirement is $75,000 or less The rebate amount is a percentage of property taxes paid for the year. New Jersey has a $250 property tax deduction for veterans and disabled veterans may be eligible for a 100% property tax exemption. See New Jersey’s Other Property Tax Benefits document for more details.
New Jersey Retirement Taxes
Social Security benefits and military pensions are not taxed in New Jersey. All other state and federal pensions, annuities and some IRA withdrawals are taxed, but there are exclusions. New Jersey taxpayers age 62 or older with $100,000 or less in state income can exclude up to $60,000 of pension, annuity, IRA or other retirement plan income. Joint filers can exclude up to $150,000, $50,000 for married filing separately and $75,000 for single filers. Income qualifications and maximums may adjust annually.
Retirees who entered the military before Sept. 24, 1975, and members receiving disability retirements based on combat injuries or who could receive disability payments from the VA are covered by laws giving disability broad exemption from federal income tax. Most military retired pay based on service-related disabilities also is free from federal income tax, but there is no guarantee of total protection.
New Jersey Estate and Inheritance Taxes
New Jersey phased out the estate tax in 2018, but still levies an inheritance tax on property transfers. The tax reaches 16% on real and personal property valued at $500 or more, unless the heir is a spouse, child, stepchild, grandchild, parent or grandparent.
For further information, visit the New Jersey Department of Taxation site.