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 1.40% to 10.75%. The top tax rate in New Jersey is one of the highest in the U.S.
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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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New Jersey Paycheck Calculator
New Jersey Paycheck Quick Facts
- New Jersey income tax rate: 1.40% - 10.75%
- Median household income: $79,363 (U.S. Census Bureau)
- Number of cities with local income taxes: 0
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, salary and additional tax withholdings, 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. Although it's been a while since then, be sure to look over your W-4 to ensure the information is all still correct.
The 2020 W-4 includes major changes from the IRS. Most notably, this involves the removal of allowances. Instead, it requires you to enter annual dollar amounts for things such as non-wage income, income tax credits, total annual taxable wages and itemized and other deductions. The revised form also features a five-step process that lets you enter personal information, claim dependents and indicate additional income and jobs. You aren't required to complete the form if you were hired before Jan. 1, 2020, but employees hired after that date need to. Anyone adjusting their withholdings or changing jobs in 2020 will also need to complete the new W-4.
New Jersey has a progressive income tax system, in which the brackets are dependent on a taxpayer's filing status and income level. As a result, the state'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 1.40% on the first $20,000 of your taxable income. Meanwhile, the highest tax bracket reaches 10.75% on income over $5 million.
On the other hand, there are eight tax brackets for married people who file jointly and heads of households. The lowest and highest rates are the same as for other filers, ranging from 1.40% to 10.75%. However, there's an extra bracket from $50,000 to $70,000 that has a 2.45% rate associated with it.
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. Therefore, no New Jersey cities levy local income taxes.
A financial advisor in New Jersey can help you understand how taxes fit into your overall financial goals. Financial advisors can also help with investing and financial plans, including retirement, homeownership, insurance and more, to make sure you are preparing for the future.
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 underpaying your taxes all year. There's one easy fix to this. 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.
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 U.S. Zoom between states and the national map to see data points for each region, or look specifically at one of the four ranking factors in our analysis: Semi-Monthly Paycheck, Purchasing Power, Unemployment Rate, and Income Growth.
Methodology To find the most paycheck friendly places for counties across the country, we considered four 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, or greatest take-home pay.
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 index that shows the counties with the lowest rate of unemployment. For income growth, we calculated the annual growth in median income throughout a five year period for each county and then 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 2018 American Community Survey, MIT Living Wage Study, Bureau of Labor Statistics
