Overview of New Jersey Retirement Tax Friendliness
Social Security is not taxed at the state level in New Jersey. State income taxes will also be low for any retirees with income from retirement accounts and pensions below $75,000 for single filers or $100,000 for joint filers. However, property taxes in New Jersey are some of the highest in the country.
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New Jersey Retirement Taxes
Considering a Garden State retirement? Depending on your financial situation, New Jersey’s tax system could be good for you – or it could be terrible for you.
The state has the highest property taxes of any state in the U.S. Homeowners in New Jersey have a median property tax bill of $9,358 per year. This means that even for seniors who have paid off their mortgage, homeownership can be a costly proposition.
On the other hand, New Jersey’s income tax system is relatively friendly to retirees. The state provides for a significant deduction for retirees with low to moderately-high earnings. Income tax rates are low for most earners, although retirees with very high earnings could pay some of the highest rates in the country.
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How tax-friendly is New Jersey for retirees?
This depends on your level of income and assets, so we’ll say moderately friendly. Social Security is not taxed at the state level in New Jersey, and state income taxes will be low for most retirees with income from retirement accounts and pensions below $75,000.
Despite the high property taxes, sales tax in New Jersey is moderate at 6.625%.
Is Social Security taxable in New Jersey?
The state of New Jersey does not tax Social Security benefits, although retirees living in New Jersey may still have to pay federal taxes on Social Security.
Are other forms of retirement income taxable in New Jersey?
Yes, they are, but New Jersey provides a large deduction on retirement income for persons age 62 and older. Anyone at that age level with a federal adjusted gross income (AGI) of $150,000 or less can deduct up to $75,000 (single filers), $100,000 (joint filers) or $50,000 (married people filing separately) in income from public or private pensions or retirement accounts, like a 401(k) or IRA.
Those with an AGI between $100,001 and $150,000 can exclude up to a percentage. Pension exclusions for income between $100,001 and $125,000 are 37.5% (singles), 50% (married, filing jointly) and 25% (married, filing separately). And for filers between $125,001 and $150,000, percentages are 25% (singles), 18.75% (married, filing jointly) and 12.5% (married, filing separately).
How high are property taxes in New Jersey?
New Jersey’s property taxes are the highest in the U.S. The median property tax paid is $9,358. This is several times higher than the U.S. median.
Housing costs in New Jersey are generally higher than elsewhere in the country as well. For example, the median home value in Jersey is $496,000. Even with the state's homestead rebate, property taxes in New Jersey can be onerous.
How high are sales taxes in New Jersey?
Sales taxes in New Jersey are close to the average among all U.S. states. The statewide rate is 6.625%. However, there are two exceptions. First, there are New Jersey’s “Urban Enterprise Zones,” where purchases made at qualified businesses (typically retailers) face a reduced sales tax rate of 3.3125%. As of 2025, there are 37 Urban Enterprise Zones in New Jersey, including parts of Newark, Trenton, Camden and more. The other exception to New Jersey’s state sales tax is Salem County. In Salem County, nearly all purchases are also subject to a reduced sales tax rate of 3.3125%. The only items that do not get that reduced rate are alcoholic beverages, cigarettes, motor vehicles, services and any transactions made from outside the county.
There are also some key exemptions for items that are especially important to seniors. Medicine (prescription and non-prescription), groceries and many types of clothing are all exempt from sales tax in New Jersey.
What other New Jersey taxes should I be concerned about?
If you are planning on passing savings or other assets on to your loved ones, you should be aware of New Jersey’s inheritance tax. Bequests passed on to non-relatives, siblings and distant relatives are taxed at rates ranging from 11% to 16%, with the first $25,000 being exempt.
New Jersey does not have an estate tax as of January 1, 2018. Prior to that date, New Jersey did have one. For any deaths in 2017, the estate tax exemption was $2 million, and with tax rates up to 16%.
