New Jersey sits between New York City and Philadelphia, so many residents work across a state line, and its tax system has more moving parts than most: seven income tax brackets, an entity-level tax election for pass-through businesses, a remote work sourcing rule and payroll contributions for disability and family leave. This profile covers tax year 2025 returns (filed in 2026) and 2026 planning for residents, commuters, business owners and employers.
Income tax brackets for 2025
New Jersey Gross Income Tax applies a graduated rate to taxable income. The 2025 schedules in the NJ-1040 instructions work out as follows:
| Rate | Single or separate | Joint, head of household |
|---|---|---|
| 1.4% | up to $20,000 | up to $20,000 |
| 1.75% | to $35,000 | to $50,000 |
| 2.45% | none | to $70,000 |
| 3.5% | to $40,000 | to $80,000 |
| 5.525% | to $75,000 | to $150,000 |
| 6.37% | to $500,000 | to $500,000 |
| 8.97% | to $1,000,000 | to $1,000,000 |
| 10.75% | over $1,000,000 | over $1,000,000 |
Residents file Form NJ-1040 and nonresidents file Form NJ-1040NR. A single filer with income of $10,000 or less, or a joint filer with $20,000 or less, generally has no filing duty. Homeowners and tenants can choose between a property tax deduction (up to $15,000 of property taxes) and a refundable property tax credit, whichever helps more.
Retirement income and Social Security
The instructions list Social Security, Railroad Retirement and U.S. military pensions as nontaxable. Other pensions can qualify for an exclusion if you are 62 or older (or blind or disabled) and your income is $150,000 or less. For background, see our Social Security taxation guide and the page for seniors and retirees.
Commuters, remote work and reciprocity
The Pennsylvania agreement means wages of New Jersey residents working in Pennsylvania are not taxed by Pennsylvania, so no credit is claimed for that tax. It does not reach Philadelphia's wage tax, and income other than wages may qualify for a credit. See Pennsylvania and our Philadelphia page.
New Jersey has a convenience of the employer rule under P.L. 2023, c.125, retroactive to January 1, 2023. Pay a nonresident earns from a New Jersey employer can be New Jersey income when the employee works from home for personal convenience rather than the employer's necessity, but the rule applies only to residents of states with a similar test. The Division lists Delaware, Nebraska and New York as examples, treats Pennsylvania residents as excluded and describes Connecticut's rule as reciprocal. New Jersey residents taxed by another state claim a credit on Schedule NJ-COJ that is not necessarily dollar for dollar and cannot exceed the New Jersey tax. Visa holders and NRIs commuting from Edison and Middlesex County can read our Edison page and H-1B and visa holder page.
Pass-through entity tax (BAIT)
Partnerships, New Jersey S corporations and multi-member LLCs taxed as either can elect BAIT if at least one member is an individual, estate or trust subject to Gross Income Tax; single-member LLCs and sole proprietors cannot. The election is filed each year, by March 15 for calendar-year filers, before any payment is accepted. Estimated payments fall on April 15, June 15, September 15 and January 15. Members receive a refundable credit for their share. The rates are tiered, so confirm them on the Division's page. Our state and local tax guide explains why owners elect.
Business taxes and sales tax
The Corporation Business Tax is generally 9% of New Jersey entire net income over $100,000, with lower rates for small corporations and a minimum tax that scales with gross receipts; the Division notes its overview has not been updated for every recent change. Its pages also list a surtax and a Corporate Transit Fee, so larger corporations should confirm current amounts. Sales tax is 6.625% on most tangible personal property, and the Division's sales tax page does not state a remote seller threshold, so see our sales tax nexus guide.
Payroll: withholding, unemployment, disability and leave
Employers withhold from residents and from nonresidents working in New Jersey, and must withhold 7% on payments to unregistered unincorporated contractors. For July 2026 the Department of Labor table lists a taxable wage base of $44,800, unemployment rates from 0.5% to 5.8% and a new-employer rate of 2.8%, with a July 1 to June 30 rate year. For 2026, employer Temporary Disability Insurance rates run from 0.10% to 0.75% on the first $44,800 per employee, employees pay 0.19% for disability and 0.23% for Family Leave Insurance on the first $171,100, and employers pay nothing toward family leave. The Department of Labor's paid sick leave page says employees earn one hour for every 30 worked, up to 40 hours per benefit year. See our multi-state payroll guide.
Property tax
Municipal assessors and county boards of taxation handle local property assessment, and the Division of Taxation monitors them.
How we can help
We prepare NJ-1040 and NJ-1040NR returns, review credits for tax paid to New York or Pennsylvania, and evaluate the BAIT election. We can also register employers, reconcile TDI and family leave contributions, and run payroll for New Jersey staff. Our multi-state tax work covers commuters. For comparison with our home state, see Illinois. This is general information, not personal advice.
Frequently asked questions
What are New Jersey's income tax rates for 2025?
They run from 1.4% to 10.75%, with the top rate applying to taxable income over $1,000,000.
Do New Jersey residents pay Pennsylvania tax on wages?
Not on wages earned in Pennsylvania because of the reciprocal agreement, but Philadelphia and other municipal wage taxes are not covered.
Is Social Security taxed in New Jersey?
The NJ-1040 instructions list Social Security benefits as nontaxable.
Official sources
- New Jersey Division of Taxation: 2025 NJ-1040 instructions and rate schedules
- New Jersey Division of Taxation: Pass-Through Business Alternative Income Tax
- New Jersey Division of Taxation: Convenience of the employer sourcing rule
- New Jersey Department of Labor and Workforce Development: TDI and FLI employer information
- U.S. Department of Labor: Significant provisions of state unemployment insurance laws, July 2026
This page is a plain-language summary. The official source controls if there is any difference.
General information only, not tax, legal or accounting advice for your situation. Rules, limits and deadlines change; confirm the current rules with the official source or a qualified professional before you act. Reading this page does not create a professional relationship with CPA Tax Payroll and Accounting Corp.