Loading
Tap on the profile icon to edit
your financial details.

New Jersey Retirement Tax Friendliness

Your Details Done
Update your information here.
OK
Overview of New Jersey Retirement Tax Friendliness

Social Security is not taxed at the state level in New Jersey and state income taxes will be low for any retirees with income from retirement accounts and pensions below about $65,000. Meanwhile, property taxes in New Jersey are the highest in the country.

Enter your financial details to calculate your taxes
Annual Social Security Income
Dismiss
Annual Retirement Account Income
Dismiss
Annual Wages
Dismiss
Location
Dismiss
Year of Birth
Dismiss
Filing Status
Annual Income from Private Pension
Dismiss
Annual Income from Public Pension
Dismiss
You will pay of New Jersey state taxes on your pre-tax income of
Your Tax Breakdown
Federal
State
Local
Total Taxes
Quick Guide to Retirement Income Taxes
is toward retirees.
Social security income is taxed.
Withdrawals from retirement accounts are taxed.
Wages are taxed at normal rates, your marginal state tax rate is %.
Public pension income is taxed, private pension income is taxed.
Choose the right savings account for you
APY
1.05%
Account Type: Savings
Initial Deposit: $0 Rate: 1.04% Min Balance: $1 Fees: $0
APY
1.00%
Account Type: MMA
Initial Deposit: $0 Rate: 1.00% Min Balance: $0 Fees: $0
Unfortunately, we are currently unable to find savings account that fit your criteria. Please change your search criteria and try again.
Searching for accounts...
Disclosure
More from SmartAsset
  • Calculate your Income Taxes in New Jersey
  • Calculate your Property Taxes in New Jersey
  • Retirement Tax Friendliness Overview
How helpful was this page in answering your question?
not helpful
very helpful
​If you could change one thing about ​this page what would it be?​
Thank you for your answer! Your feedback is very important to us.
We are working hard to improve our product and could use your help!
We pay $30 for 30 minutes on the phone to hear your thoughts on what we can do better.
Please enter your email if you'd like to be contacted to help.

Please enter your name

New Jersey Retirement Taxes

Photo credit: ©iStock.com/200mm

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 pay around $7,000 a year on property taxes (on average). 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 for 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. Below, we’ll answer some of the most common questions retirees have about taxes in New Jersey.

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 any retirees with income from retirement accounts and pensions below about $65,000. Property taxes in New Jersey are the highest in the country, so retirees who own a New Jersey home could find themselves paying an arm and a leg. Sales taxes are moderate at 7%.

Is Social Security taxable in New Jersey?

No! 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, but New Jersey provides a large deduction on retirement income for persons age 62 or older. Anyone at that age level with federal Adjusted Gross Income (AGI) of less than $100,000 can deduct $15,000 (single filers) or $20,000 (joint filers) in income from pensions (public or private) or retirement accounts like a 401(k) or IRA.

Income Tax Brackets

Single Filers
New Jersey Taxable IncomeRate
$0 - $20,0001.400%
$20,000 - $35,0001.750%
$35,000 - $40,0003.500%
$40,000 - $75,0005.525%
$75,000 - $500,0006.370%
$500,000+8.970%
Married, Filing Jointly
New Jersey Taxable IncomeRate
$0 - $20,0001.400%
$20,000 - $50,0001.750%
$50,000 - $70,0002.450%
$70,000 - $80,0003.500%
$80,000 - $150,0005.525%
$150,000 - $500,0006.370%
$500,000+8.970%
Married, Filing Separately
New Jersey Taxable IncomeRate
$0 - $20,0001.400%
$20,000 - $35,0001.750%
$35,000 - $40,0003.500%
$40,000 - $75,0005.525%
$75,000 - $500,0006.370%
$500,000+8.970%
Head of Household
New Jersey Taxable IncomeRate
$0 - $20,0001.400%
$20,000 - $50,0001.750%
$50,000 - $70,0002.450%
$70,000 - $80,0003.500%
$80,000 - $150,0005.525%
$150,000 - $500,0006.370%
$500,000+8.970%

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 $7,171. 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 $327,100. Even with the homestead rebate (described below), property taxes in New Jersey can be onerous.

What is the New Jersey homestead exemption?

The New Jersey homestead rebate is a property tax benefit available to New Jersey homeowners who are at least 65 years old. The rebate is based on your income and the property taxes you have paid in prior years. For example, the rebate paid to seniors in 2015 is based on 2012 gross income and 2006 property taxes.

If your 2012 New Jersey gross income was less than $100,000, the benefit is equal to 10% of your 2006 property taxes up to a maximum of $10,000. If your 2012 New Jersey gross income was between $100,000 and $150,000, the benefit is equal to 5% of 2006 property taxes up to $10,000. For homeowners with 2012 income above that level, the benefit is zero.

Photo credit: ©iStock.com/rococofoto

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 7%. Local governments do not collect their own sales taxes. 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 estate and inheritance taxes. They are among the most stringent in the U.S. The estate tax exemption is $675,000, far lower than the federal exemption. Estates above that limit face very steep taxes, as there is a tax “cliff” once you exceed the exemption.

Furthermore, inheritances passed on to non-relatives, siblings and distant relatives can be double-taxed. The first $25,000 is exempt. After that, rates range from 11% to 16%.

Most Tax Friendly Places for Retirees

SmartAsset’s interactive map highlights the places in the country with tax policies that are most favorable to retirees. Zoom between states and the national map to see the most tax-friendly places in each area of the country.

Highest
Lowest
Rank City Income Tax Paid Property Tax Rate Sales Tax Paid Fuel Tax Paid Social Security Taxed?

Methodology Our study aims to find the areas with the most tax-friendly policies for retirees. To do that we looked at how the tax policies of each city would impact a retiree with a $50,000 income. Our hypothetical retiree is getting $15,000 from Social Security benefits, $10,000 from a private pension, $15,000 from retirement savings like a 401(k) or IRA and $10,000 in wages.

To calculate the expected income tax this person would pay in each location we applied deductions and exemptions. This included the standard deduction, personal exemption and deductions for each specific type of retirement income. We then calculated how much this person would pay in income tax at the federal, state, county and local levels.

We calculated the effective property tax rate by dividing median property tax paid by median home value for each city.

In order to determine sales tax burden we estimated that 35% of take-home (after-tax) pay is spent on taxable goods. We multiplied the average sales tax rate for a city by the household income less income tax. This product is then multiplied by 35% to estimate the sales tax paid.

For fuel taxes, we first distributed statewide vehicle miles traveled down to the city level using the number of vehicles in each county. We then calculated miles driven per capita in each city. Using the nationwide average fuel economy, we calculated the average gallons of gas used per capita in each city and multiplied that by the fuel tax.

For each city we determined whether or not Social Security income was taxable.

Finally, we created an overall index weighted to best capture the taxes that most affect retirees. We gave a 4x weighting to income tax, 3x weighting to property tax rate, a 2x weighting to sales tax and 1x weighting to fuel tax.

Sources: Internal Revenue Service, Social Security Administration, state websites, local government websites, US Census Bureau 2015 American Community Survey, Avalara, American Petroleum Institute, GasBuddy, UMTRI, Federal Highway Administration

More from SmartAsset
  • Calculate your Income Taxes in New Jersey
  • Calculate your Property Taxes in New Jersey
  • Retirement Tax Friendliness Overview