Overview of New Jersey Taxes
The Garden State has a progressive income tax system. The rates, which vary depending on income level and filing status, range from 1.4% to 11.8%. The top tax rate in New Jersey is the second highest in the country, after an increase in 2018.
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- Our Tax Expert
Jennifer Mansfield, CPA Tax
Jennifer Mansfield, CPA, JD/LLM-Tax, is a Certified Public Accountant with more than 30 years of experience providing tax advice. SmartAsset’s tax expert has a degree in Accounting and Business/Management from the University of Wyoming, as well as both a Masters in Tax Laws and a Juris Doctorate from Georgetown University Law Center. Jennifer has mostly worked in public accounting firms, including Ernst & Young and Deloitte. She is passionate about helping provide people and businesses with valuable accounting and tax advice to allow them to prosper financially. Jennifer lives in Arizona and was recently named to the Greater Tucson Leadership Program.
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 Photo credit: ©iStock.com/Henryk Sadura | New Jersey Paycheck Quick Facts
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How Your New Jersey Paycheck Works
Your New Jersey employer is responsible for withholding FICA taxes and federal income taxes from your paychecks. Medicare and Social Security taxes together make up FICA taxes. Your employer will withhold 1.45% of your wages for Medicare taxes each pay period and 6.2% in Social Security taxes. Your employer matches your Medicare and Social Security contributions, so the total payment is doubled. Any wages you earn in excess of $200,000 is subject to a 0.9% Medicare surtax, which is not matched by your company.
Federal income taxes are also withheld from each of your paychecks. Your employer uses the information that you provided on your W-4 form to determine how much to withhold in federal income tax each pay period. Several factors, like your marital status, your salary, how many allowances you claim and if you opt to have additional tax withheld from your paychecks, play a role in how much is taken out from your wages for federal taxes.
Take note that withholding calculations changed for the 2018 tax year because of President Trump’s new tax plan. You should have seen any changes to your paycheck in early 2018. If you haven’t checked your W-4 recently, the beginning of the year is good a good time to look it over just to ensure the information is all still correct.
How many allowances you can claim differs from person to person and is affected by things like your filing status and how many people you can claim as dependents. The more allowances you claim, the less your employer withholds form your pay and the bigger your paychecks are. Keep in mind though, if you overclaim allowances, you run the risk of not paying enough in taxes for the entire year and being slammed with a big bill come April.
New Jersey Median Household Income
| Year | Median Household Income |
| 2017 | $76,475 |
| 2016 | $73,702 |
| 2015 | $72,093 |
| 2014 | $71,919 |
| 2013 | $70,165 |
| 2012 | $69,667 |
| 2011 | $67,458 |
| 2010 | $67,681 |
| 2009 | $68,342 |
| 2008 | $70,378 |
New Jersey has a progressive income tax system, in which the tax brackets are dependent on taxpayers’ filing status and income level. New Jersey’s income tax is structured similarly to the federal income tax system. If you are single or married and filing separately in New Jersey, there are seven tax brackets that apply to you. At the lower end, you will pay at a rate of 1.4% on the first $20,000 of your taxable income. Meanwhile, the highest tax bracket has seen some changes recently. Prior to 2018, the highest rate was 8.97% on income in excess of $500,000. Starting in 2018, there is a top bracket on income above $5 million. The rate for that highest bracket was 10.75% at the start of the year. That rate was increased to 15.6% for the period of September 2018 to December 2018. The increase was to allow any taxpayers affected by the rate increase to “catch up” on their withholdings for the year since the new tax rate was passed during 2018 but applied retroactively to January 1. Beginning on January 1, 2019, the withholding rate on income over five million dollars is 11.8%.
There are eight tax brackets for married people who file jointly and the heads of households. The lowest and highest rates are the same as for other filers, ranging from 1.4% to 10.75% (or 15.6%). The top tax rate in New Jersey is the second highest in the country.
If you're an employee in Newark, it’s important to know that while the city has a 1% payroll tax, it applies to employers, not workers. No New Jersey cities levy local income taxes.
How You Can Affect Your New Jersey Paycheck
Most people want a bigger paycheck, and you can certainly take steps toward that – for instance, by asking for a raise or by working extra hours (if you are eligible for overtime). But while it’s always nice to increase your earnings, there are times when it might be smart to shrink your actual paycheck. If you elect to put more money into a pre-tax retirement account like a 401(k) or 403(b), for instance, you will save for the future while lowering your taxable income. The money that you put into a 401(k) or 403(b) comes out of your paycheck before taxes are applied, so by putting more money in a retirement account, you are paying less money in taxes right now. So, while you will receive a smaller paycheck each month, you will actually get to keep more of your salary this way.
Another reason why you might elect to receive a smaller paycheck is if you always find yourself paying a tax bill in April. If this is the case, you may be claiming too many allowances and underpaying your taxes all year. There are a couple easy fixes to this. You can claim fewer allowances on a new W-4 form or you can ask your employer to withhold an additional dollar amount from your paychecks, say $50 per paycheck. Ultimately you will pay the same amount in taxes, but this way you’re spreading out it out and paying a little more each pay period, instead of in a lump sum come tax season.
New Jersey Top Income Tax Rate
| Year | Top Income Tax Rate |
| 2019 | 11.80% |
| 2018 | 10.75% |
| 2017 | 8.97% |
| 2016 | 8.97% |
| 2015 | 8.97% |
| 2014 | 8.97% |
| 2013 | 8.97% |
| 2012 | 8.97% |
| 2011 | 8.97% |
| 2010 | 8.97% |
| 2009 | 10.75% |
| 2008 | 8.97% |
| 2007 | 8.97% |
If you see yourself buying a home or refinancing in the Garden State anytime soon, check out our New Jersey mortgage guide for details on rates and the specifics about getting mortgages in the state.
Most Paycheck Friendly Places
SmartAsset's interactive map highlights the most paycheck friendly counties across the country. Zoom between states and the national map to see data points for each region, or look specifically at one of the four factors driving our analysis: Semi-Monthly Paycheck, Purchasing Power, Unemployment Rate, and Income Growth.
Methodology Our study aims to find the most paycheck friendly places in the country. These are places in the country with favorable economic conditions where you get to keep more of the money you make. To find these places we considered four different factors: semi-monthly paycheck, purchasing power, unemployment rate and income growth.
First, we calculated the semi-monthly paycheck for a single individual with two personal allowances. We applied relevant deductions and exemptions before calculating income tax withholding. To better compare withholding across counties we assumed a $50,000 annual income. We then indexed the paycheck amount for each county to reflect the counties with the lowest withholding burden.
We then created a purchasing power index for each county. This reflects the counties with the highest ratio of household income to cost of living. We also created an unemployment rate index that shows the counties with the lowest unemployment. For income growth, we calculated the annual growth in median income over five years for each county and indexed the results.
Finally, we calculated the weighted average of the indices to yield an overall paycheck friendliness score. We used a one half weighting for semi-monthly paycheck and a one-sixth weighting for purchasing power, unemployment rate and income growth. We indexed the final number so higher values reflect the most paycheck friendly places.
Sources: SmartAsset, government websites, US Census Bureau 2017 5-Year American Community Survey, MIT Living Wage Study, Bureau of Labor Statistics
