New Jersey

Tax Rate Range: Low - 1.4%; High - 8.97%
Income Brackets: * Lowest - $20,000; Highest - $500,000
Number of Brackets: 6
Personal Exemptions: Single - $1,000; Married - $2,000;
Dependents - $1,500
Additional Exemptions: Taxpayer or spouse 65 or older - $1,000
Standard Deduction: None
Medical/Dental Deduction: Limited to excess of 2% of gross income
Federal Income Tax Deduction: None
Retirement Income Taxes: Social Security and Railroad Retirement benefits, and benefits received as a result of permanent and total disability before age 65, are not taxable and should not be reported as pension income. However, if you retired before age 65 on a total and permanent disability pension , and you continue to receive pension payments after age 65, your disability pension is treated as ordinary pension income beginning the year you reach age 65.

State Tax Software

The state provides several income exclusions to enable residents to reduce their taxable income. These exclusions can be used every year you qualify. Persons 62 or older may use the Pension Exclusion to exclude all or part of their taxable pensions, annuities, and IRA withdrawals provided their gross income for the entire year before subtracting any pension does not exceed $100,000. The maximum amount excluded depends on your filing status. If married and filing a joint return, you may exclude up to $20,000. If you file as single, head of household, or qualifying widow or widower, you may exclude up to $15,000. If you are married, filing a separate return, you may exclude up to $10,000. If you file a joint return, and both you and your spouse qualify for the Pension Exclusion, you may apply the exclusion to the total taxable pension amount on your return. However, if only one spouse is age 62 or older or disabled, then only the income of the spouse who is age 62 or older or disabled ay be excluded.
Retired Military Pay: Exempt from taxes.
Military Disability Retired Pay: Disability Portion - Length of Service Pay; Member on September 24, 1975 - No tax; Not Member on September 24, 1975 - Taxed, unless combat incurred. Retired Pay - Based solely on disability: Member on September 24, 1975 - No tax; Not Member on September 24, 1975 - Taxed, unless all pay based on disability and disability resulted from armed conflict, extra-hazardous service, simulated war, or an instrumentality of war.
VA Disability Dependency and Indemnity Compensation: Not subject to federal or state taxes
Military SBP/SSBP/RCSBP/RSFPP: Not subject to New Jersey gross income tax.
* The tax brackets reported are for a single individual. A separate schedule is provided for married households filing jointly which ranges from 1.4% under $20,000 to 8.97 for income over $500,000.

Sales Taxes

State Sales Tax: 7% (food, prescription drugs and non-prescription
drugs, clothing, footwear exempt)
Gasoline Tax: 14.5 cents/gallon
Diesel Fuel Tax: 17.5 cents/gallon
Gasohol Tax: 14.5 cents/gallon
Cigarette Tax: $2.575/pack of 20

Property Taxes

Property taxation is local. To review rates by county, click here. Then click on Local Property Taxes. Also click on Property Tax Relief Programs in the left menu for details about the programs described below.
The FAIR Rebate Program (sometimes referred to as the Homestead Rebate Program) provides rebates for homeowners and tenants who occupied their principal residence in New Jersey on Oct 1, paid property taxes on that dwelling either directly or through rent, and whose gross income for the entire year does not exceed certain limits. Only New Jersey residents who were either homeowners or tenants on October 1, 2005, are eligible for a 2005 FAIR rebate. Homeowners and tenants file different applications according to their status.
The Property Tax Reimbursement Program reimburses eligible senior citizens and disabled persons for property tax increases. The amount of the reimbursement is the difference between the amount of property taxes that were due and paid in the "base year" (the first year that all the eligibility requirements were met) and the amount due and paid in the current year for which you are claiming the reimbursement, provided the amount paid in the current year was greater. You must meet all the eligibility requirements for the base year and for each succeeding year, up to and including the current year to qualify for the reimbursement.
A Property Tax Deduction/Credit is available to eligible homeowners and tenants who pay property taxes, either directly or through rent, on their principal residence in New Jersey. They are eligible for either a deduction or a refundable credit on their New Jersey resident income tax return. Homeowners and tenants may be eligible for a deduction or credit even if they are not eligible for a homestead rebate. Qualified residents may deduct 100% of their property taxes due and paid or $10,000, whichever is less. For tenants, 18% of rent paid during the year is considered property taxes paid. The minimum benefit is a refundable credit of $50. Those eligible must be 65 years of age or older or blind or disabled and are not required to file a return because their income is below the minimum filing threshold.

Estate Taxes

New Jersey imposes a transfer inheritance tax, at graduated rates ranging from 11% to 16%, on the transfer of real and personal property having a total value of $500 or more which passes from a decedent to a beneficiary. If a decedent's death occurs on or after July 1, 1988, property passing to a decedent's surviving spouse, surviving parents, grandparents, children, stepchildren or grandchildren is entirely exempt from the tax.
In addition to the inheritance tax, New Jersey imposes a separate estate tax. An estate may be subject to the New Jersey Estate Tax even though there is no New Jersey Inheritance Tax payable. For decedents with a date of death prior to January 1, 2002 the New Jersey Estate Tax was designed to absorb the maximum credit for state inheritance, estate, succession or legacy taxes allowable in the Federal estate tax proceeding. It did not increase the estate's total estate tax obligation. For decedents with a date of death on or after January 1, 2002 the New Jersey Estate Tax was decoupled from the Federal estate tax proceeding.
The New Jersey Estate tax is based upon the Federal Estate tax credit for state death taxes which was allowable under the provisions of the Internal Revenue Code in effect on December 31, 2001. The Federal Estate tax does not have a provision providing a deduction for property passing to a domestic partner.
Information pertaining to the estate and inheritance tax may be obtained by calling 609-292-5033 or 609-292-5035. A special section on information for seniors can be accessed by clicking here.
For further information, visit the New Jersey Department of Taxation site.