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 $3,300 in state income tax (effective ~3.3%). Add SDI (State Disability Insurance, $60/year max) and FLI (Family Leave Insurance, 0.09%). NJ also has a 10.75% millionaire's tax on income above $1M — the highest top rate in the Northeast alongside NY/NYC combined rates.
0.26% of wages up to $161,400; maximum deduction $419.64/year (2026)
FLI — Family Leave Insurance
0.09% of wages (2026 estimate); funds 12-week paid family leave at up to 85% of wages
Property Tax
Average effective rate ~2.13% — among the highest in the country; average NJ property tax bill ~$9,800/year
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 is among the most complex of all US states — 7 brackets with varying rates across income ranges, plus the SDI (State Disability Insurance) and FLI (Family Leave Insurance) deductions that every NJ employee pays. The state also has one of the highest property taxes in the country (average effective rate ~2.13%) and a separate millionaire's tax bracket at 10.75%.
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 ~$116,185. Effective rate: 7.7% (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:
SDI — State Disability Insurance (NJ-SDI): 0.26% of wages up to the wage base (~$161,400 for 2026). Maximum annual deduction: ~$420. SDI funds temporary disability benefits (up to 26 weeks at 85% of wages, capped at ~$1,065/week).
FLI — Family Leave Insurance (NJ-FLI): 0.09% of wages (2026 rate; 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 higher in earlier years; 2026 rate confirmed by NJ Department of Labor.
Combined, SDI + FLI typically cost under $500/year for most employees — small individually but notable as a total system unique to NJ. These deductions are reported on the NJ-W2 and are not deductible on the NJ return but may be deductible on federal Schedule A if itemising.
Section 03
NJ Property Tax: The Biggest Tax Burden for Homeowners
New Jersey has the highest average property tax burden of any US state, with an average effective rate of approximately 2.13% and average annual bills around $9,800. County and municipal rates vary significantly:
Essex County (Newark area): Average effective rate ~2.5%; some municipalities above 3%
Bergen County (Northern NJ suburbs): Average ~2.0%; towns like Tenafly and Ridgewood above 2.2%
Monmouth County (Shore area): Average ~1.8%
Cape May County: Average ~1.2% (lowest in NJ)
NJ's ANCHOR property tax relief program (formerly Homestead Benefit) provides credits to homeowners and renters — $1,500 for homeowners earning up to $150,000; $1,000 for homeowners $150,001–$250,000. 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
Approximately 350,000 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 NYC's additional ~3.876% local income tax does NOT trigger a corresponding NJ credit (NJ does not impose a similar local tax). The NYC income tax is therefore an additional real cost for NJ residents working in Manhattan.
For a NJ resident earning $150,000 in NYC: NY state tax ~$8,400 + NYC ~$5,350 = ~$13,750 total paid to New York. After NJ credit for NY state tax (~$8,400), the NJ resident owes $0 additional NJ state income tax (NJ tax ~$6,385 minus credit ~$8,400 = overpayment). But the $5,350 NYC local tax is an additional real cost over living and working entirely in NJ.
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?
New Jersey has 7 income tax brackets: 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' and was made permanent in 2020.
Q
What is NJ SDI and how much do I pay?
NJ SDI (State Disability Insurance) is a mandatory payroll deduction of 0.26% of wages up to approximately $161,400 (2026 wage base) — maximum around $420/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 has the highest average property tax in the country — approximately $9,800/year average bill, with an effective rate around 2.13% of market value. Rates vary by county: Essex County averages over 2.5%, while Cape May County averages around 1.2%. The ANCHOR program provides credits up to $1,500 for eligible homeowners.
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, New York City's additional ~3.876% local income tax does not trigger a NJ credit — it's a real additional cost for NJ-to-NYC commuters.
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.