New Jersey's Steep Climb to 10.75%
New Jersey runs a progressive income tax from 1.4% up to 10.75%, one of the highest top rates in the country, the 10.75% "millionaire's tax" applies to income over $1 million, with an 8.97% bracket from $500,000 to $1 million. There is no standard deduction; New Jersey uses modest personal exemptions instead. A single filer earning $120,000 owes about $5,518 in state income tax, an effective state rate near 4.6%, because most of that income is taxed in the 5.525% and 6.37% bands rather than the headline top rate.
New Jersey Withholds for Disability and Family Leave, Again in 2026
Like Washington, New Jersey funds temporary disability and family leave through employee payroll deductions, and 2026 brought a notable change. After setting the employee disability (TDI) contribution to 0% for several years, New Jersey reinstated it for 2026 at 0.19%, alongside the family leave (FLI) deduction at 0.23%, each on the first $171,100 of wages (maximums of $325.09 and $393.53). On a $120,000 salary that is about $228 plus $276, roughly $504 a year in premiums that returned in 2026 after a hiatus, small, but easy to miss when comparing offers.
No Local Income Tax
New Jersey has no municipal income tax withheld from employees, Newark's payroll tax is paid by employers, not workers, so your sub-federal deductions are the state progressive tax plus the TDI and FLI premiums. That keeps the in-state picture simpler than Ohio's or Pennsylvania's local patchworks, even though New Jersey's headline rates run higher. What complicates many New Jersey paychecks is not local tax but commuting across state lines.
The Commuter Question: NYC and Philadelphia
A large share of New Jersey residents work in New York or Pennsylvania, and the rules differ sharply. New York has no reciprocity, so a New Jersey resident working in Manhattan pays New York tax on those wages and claims a credit on the New Jersey return. Pennsylvania does reciprocate with New Jersey, so a New Jersey resident working in PA pays New Jersey tax, not Pennsylvania income tax, but Philadelphia's city wage tax is not covered by reciprocity and still applies. If you commute, your effective rate depends heavily on which state, and which city, you work in.
Planning in a High-Rate State
New Jersey's high marginal rates make pre-tax contributions especially valuable: a traditional 401(k) dollar can save 6.37% or more in state tax on top of your federal bracket, and far more for earners in the 8.97% and 10.75% bands. For high earners straddling the $500,000 or $1 million thresholds, timing income and maximizing deferrals meaningfully reduces what hits the top rates. Use the calculator above to model how each pre-tax dollar changes your New Jersey take-home pay.
New Jersey's Pension Exclusion Can Zero Out Retiree Tax
New Jersey treats retirees very differently from workers. Social Security is fully exempt, and the state's retirement income exclusion lets filers 62 or older (or disabled) shield a large share of pension, annuity, and IRA income, up to $100,000 for a married couple, $75,000 for a single filer, and $50,000 for married-filing-separately, provided total income is $150,000 or less (New Jersey Division of Taxation). Between $100,001 and $150,000 of income the exclusion phases down to a percentage, and above $150,000 it disappears. The practical result is that a retired New Jersey couple living on under $100,000 can owe little or no state income tax, a sharp contrast to the 5.525% to 10.75% a working household faces.
The 40% Earned Income Credit, the Most Generous in the Country
New Jersey's Earned Income Tax Credit equals 40% of the federal EITC (New Jersey Division of Taxation), the highest state match in the nation, and it is refundable. New Jersey also extended eligibility to some workers the federal credit excludes, including those as young as 18 and without the federal upper age cutoff. For a lower-income New Jersey worker, the 40% match meaningfully offsets the state's steep rate schedule, so it is worth claiming even though New Jersey is not thought of as a low-tax state.
The Property Tax That Dwarfs the Paycheck Line
New Jersey carries the highest effective property tax in the country, around 2.49% of home value, so for most New Jersey households the property bill, not the income tax, is the largest state-and-local tax they pay. The state offers partial relief: a property tax deduction of up to $15,000 (or a small refundable credit instead), plus programs like ANCHOR and the Senior Freeze. None of this touches your paycheck, but when you compare a New Jersey job offer to one in a lower-property-tax state, the income-tax line badly understates the gap. Run both your paycheck and your likely property tax before deciding.
The HSA Trap That Catches Transplants
Here is a New Jersey quirk that surprises people moving from other states: New Jersey does not allow a deduction for Health Savings Account contributions. Money you route into an HSA escapes federal income tax, but New Jersey still taxes it as wages, because the state's narrow list of pre-tax exclusions covers 401(k) contributions and little else. A transplant who maxes an HSA expecting state savings, and sets withholding accordingly, can be under-withheld at the New Jersey line. Treat HSA contributions as fully taxable for New Jersey purposes even while you take the federal break.
Social Security and Medicare (FICA) are federal, so they come out the same in New Jersey as in every other state. The main Paycheck Calculator walks through the full federal side, including the Social Security wage base and the Additional Medicare surtax.