New Jersey income tax runs from 1.4% to 10.75% across 7 brackets in 2026. At $100,000 income, a New Jersey resident pays approximately $4,180 in state income tax (effective ~4.2%). Add the employee TDI (Temporary Disability Insurance, often called SDI; 0.19% up to $171,100) and FLI (Family Leave Insurance, 0.23% up to $171,100) payroll contributions. NJ also taxes income above $1M at 10.75% (the 'millionaire's tax' rate, in place since tax year 2020) — one of the highest top rates in the Northeast, just below New York State's 10.9%.
TDI (often called SDI) — Temporary Disability Insurance
0.19% of wages up to $171,100; maximum deduction $325.09/year (2026)
FLI — Family Leave Insurance
0.23% of wages up to $171,100 (maximum $393.53/year in 2026); funds 12-week paid family leave at up to 85% of wages
Property Tax
Among the highest in the US; Tax Foundation county data show effective rates from about 0.9% (Cape May) to about 2.5% (Camden)
Sales Tax
6.625% statewide; reduced to 3.3125% in Urban Enterprise Zones
Capital Gains
Taxed as ordinary income at NJ bracket rates (1.4%–10.75%); no preferential rate
Introduction
New Jersey's income tax system has 7 brackets for single filers (joint filers have an additional 2.45% bracket) with varying rates across income ranges, plus the TDI (Temporary Disability Insurance, often called SDI) and FLI (Family Leave Insurance) deductions that every covered NJ employee pays. The state also has some of the highest property taxes in the country and a separate top bracket of 10.75% on income above $1 million.
For many NJ residents working in New York City, the tax picture involves both NJ state income tax on NJ-source income and NY state income tax on NY wages — creating a complex commuter filing situation.
Section 01
NJ Income Tax: What You Actually Pay in 2026
New Jersey's bracket structure is deceptive — the low 1.4% starting rate creates a perception of low taxes, but the brackets stack up quickly. Here's the full picture at key income levels (single filer, standard deduction):
$1,500,000 income: NJ tax ~$128,216. Effective rate: 8.5% (10.75% on income above $1M)
NJ does not have a standard deduction in the traditional sense — instead it has a personal exemption of $1,000 (single), $2,000 (married filing jointly), plus dependent exemptions. The lack of a large standard deduction means more income is subject to NJ tax compared to states that allow federal standard deduction mirroring.
Section 02
SDI and FLI: NJ's Hidden Payroll Deductions
New Jersey employees pay two additional mandatory deductions beyond income tax that are often overlooked:
TDI — Temporary Disability Insurance (often called SDI): 0.19% of wages up to the wage base ($171,100 for 2026). Maximum annual deduction: $325.09. TDI funds temporary disability benefits (up to 26 weeks at 85% of wages, capped at $1,119/week in 2026).
FLI — Family Leave Insurance (NJ-FLI): 0.23% of wages up to $171,100 (2026 rate, maximum $393.53; changes annually). FLI funds New Jersey's 12-week paid family leave program at up to 85% of wages (capped similarly). The FLI rate has varied significantly — it was 0.33% in 2025 and 0.09% in 2024; the 2026 rate is set by the NJ Department of Labor.
Combined, TDI + FLI cost employees up to $718.62/year in 2026 ($325.09 + $393.53), less below the $171,100 wage base — modest individually but easy to overlook. These deductions are not deductible on the NJ return, but the IRS Schedule A instructions list mandatory NJ TDI and FLI contributions among state and local income taxes that may be deducted federally if you itemise (subject to the SALT cap).
Section 03
NJ Property Tax: The Biggest Tax Burden for Homeowners
New Jersey is consistently among the states with the highest effective property tax rates in the US. County and municipal rates vary significantly. Effective rates (median property taxes paid as a share of median home value) from the Tax Foundation's county table (Property Taxes by State and County, 2026) include:
Essex County (Newark area): 2.10%
Bergen County (Northern NJ suburbs): 1.89%
Monmouth County (Shore area): 1.53%
Cape May County: 0.93% (the lowest of NJ's 21 counties in that table)
Camden County: 2.47% (the highest of NJ's 21 counties in that table)
NJ's ANCHOR property tax relief program (replacing the former Homestead Benefit) provides credits to homeowners and renters — for the 2025 benefit year, $1,500 for homeowners with NJ-1040 line 29 income up to $150,000 and $1,000 for homeowners with income of $150,001–$250,000 (age-based adjustments apply). The credit partially offsets but does not eliminate NJ's property tax burden relative to other states.
Section 04
NJ Commuters Working in New York City: The Double-Tax Situation
Many New Jersey residents commute to New York City for work. This creates a complex tax filing situation:
The basic rule: NJ residents pay NY state income tax on wages earned in New York, PLUS NJ income tax on all worldwide income. They then claim a credit on their NJ return for taxes paid to NY, which prevents true double taxation.
However, the credit is imperfect — NJ's rates differ from NY rates at various income levels, and the credit is capped at the NJ tax on that income, so the resident effectively pays the higher of the two states' taxes. New York City's personal income tax applies only to NYC residents, so NJ residents working in Manhattan do not owe it.
For a NJ resident earning $150,000 in New York: NY state tax is ~$8,291 (single filer, state only). After the NJ credit for NY state tax (capped at NJ's own tax on that income, ~$7,365), the NJ resident owes $0 additional NJ state income tax (NJ tax ~$7,365 minus credit ~$7,365 = $0), but effectively pays the ~$926 by which New York's tax exceeds New Jersey's.
Navigating state income tax — especially if you are relocating, have multi-state income, or are planning retirement — benefits from professional CPA guidance. TaxHub connects you with licensed tax professionals.
⚠ Not for simple single-state returns. Free filing is fine for straightforward W-2 situations.
What are the New Jersey income tax brackets for 2026?
For single filers, New Jersey has 7 income tax brackets (joint filers have an extra 2.45% bracket): 1.4% (up to $20,000), 1.75% ($20,001–$35,000), 3.5% ($35,001–$40,000), 5.525% ($40,001–$75,000), 6.37% ($75,001–$500,000), 8.97% ($500,001–$1M), and 10.75% (above $1,000,000). The 10.75% top rate is known as the 'millionaire's tax'; since tax year 2020 (P.L. 2020, c. 94) it has applied to taxable income above $1 million.
Q
What is NJ SDI and how much do I pay?
NJ's disability payroll deduction is officially called TDI (Temporary Disability Insurance), often referred to as SDI. It is a mandatory payroll deduction of 0.19% of wages up to $171,100 (2026 wage base) — maximum $325.09/year. It funds temporary disability benefits (up to 26 weeks, 85% of wages) when you can't work due to illness, injury, or pregnancy.
Q
Does New Jersey have a standard deduction?
No. New Jersey does not mirror the federal standard deduction. Instead, NJ allows a personal exemption of $1,000 (single) or $2,000 (married filing jointly) plus dependent exemptions. This means more income is subject to NJ tax compared to states that adopt the federal standard deduction.
Q
How does NJ tax capital gains?
New Jersey taxes capital gains as ordinary income — the same 1.4% to 10.75% brackets apply. There is no preferential lower rate for long-term capital gains at the state level. Unlike federal (where long-term gains are taxed at 0%, 15%, or 20%), NJ treats all capital gains the same as wages.
Q
What is New Jersey's average property tax?
New Jersey is consistently among the states with the highest effective property tax rates in the US. Rates vary widely by county: per the Tax Foundation's county table, Camden County is about 2.47% and Essex County about 2.10%, while Cape May County is about 0.93%. The ANCHOR program provides credits of up to $1,500 (2025 benefit year, homeowners with income up to $150,000; age-based adjustments apply).
Q
Do NJ residents pay taxes if they work in New York?
Yes, but with a credit to avoid double taxation on state income tax. NJ residents working in New York pay NY state income tax on wages earned there, then claim a credit on their NJ return. However, the NJ credit is capped at NJ's own tax on that income, and New York City's income tax applies only to NYC residents, so NJ residents who commute into the city do not owe it.
Disclaimer:This guide is for educational purposes only and does not constitute tax or legal advice. Tax rates and rules change annually. Consult a qualified CPA or tax attorney for advice specific to your situation.