New Jersey Tax Guide: High Taxes, Strong Credits
Navigate New Jersey's progressive income tax, the nation's highest property taxes, and valuable credits for 2025.
Tax Overview
New Jersey has one of the highest overall tax burdens in the nation, driven by a progressive income tax with rates up to 10.75% and the highest property taxes in the country. The income tax has seven brackets, with the top rate applying to income above $1 million. An additional bracket at 8.97% applies to income between $500,000 and $1 million, making New Jersey particularly expensive for high earners.
Sales tax in New Jersey is 6.625%, but the state exempts many essential items including groceries, clothing, footwear, and prescription drugs. Certain municipalities in designated Urban Enterprise Zones offer a reduced rate of 3.3125% to encourage economic development. The clothing exemption makes New Jersey a popular shopping destination for residents of neighboring states.
New Jersey's property taxes are the highest in the nation, with effective rates averaging around 2.23% and median annual bills exceeding $8,800. The state offers several relief programs, including the ANCHOR property tax benefit, the Senior Freeze program, and the homestead benefit. Despite these programs, property taxes remain the single largest tax burden for most New Jersey homeowners and a frequent topic of political debate.
Income Tax
New Jersey has the fourth-highest top income tax rate in the nation at 10.75%. Combined with the highest property taxes, NJ has one of the heaviest overall tax burdens.
| Income Range | Tax Rate |
|---|---|
| $0 – $20,000 | 1.4% |
| $20,001 – $35,000 | 1.75% |
| $35,001 – $40,000 | 3.5% |
| $40,001 – $75,000 | 5.525% |
| $75,001 – $500,000 | 6.37% |
| $500,001 – $1,000,000 | 8.97% |
| $1,000,001 + | 10.75% |
Sales Tax
Property Tax
Key Deductions in New Jersey
- ✓Property tax deduction (up to $15,000) or credit (up to $50)
- ✓ANCHOR property tax benefit program
- ✓Senior Freeze (Property Tax Reimbursement) for qualifying seniors
- ✓Retirement income exclusion (up to $150,000 for 62+ joint filers)
- ✓Earned income tax credit (40% of federal EITC)
- ✓NJ 529 plan contribution (no state income tax deduction, but no state tax on earnings)
Filing Information
Filing Deadline: April 15
Tax Authority: New Jersey Division of Taxation
Phone: (609) 292-6400
Website: https://www.nj.gov/treasury/taxation
Frequently Asked Questions
Why are New Jersey property taxes the highest in the nation?
Is clothing taxed in New Jersey?
What is the ANCHOR program?
Does New Jersey tax retirement income?
Neighboring State Guides
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