Does New Jersey Tax Social Security and Retirement Income?

Social Security is not taxed at any income level

New Jersey leaves Social Security out of its income tax entirely. The NJ-1040 instructions list Social Security and Railroad Retirement benefits among the items that are not reported on the return, so the portion that is taxable on a federal Form 1040 never enters the New Jersey calculation, whatever the household’s income. (New Jersey Division of Taxation, 2025 Form NJ-1040 instructions)

Because benefits are not reported, they also do not count toward the $100,000 and $150,000 total-income tests that control the pension exclusion described below. A couple with $70,000 of Social Security and $95,000 of other income is measured at $95,000 for that purpose. (New Jersey Division of Taxation, 2025 Form NJ-1040 instructions)

The federal government is a separate matter. Up to 85% of a benefit can be taxed on a federal return once other income passes fixed thresholds, wherever you live. Our taxable Social Security calculator shows how much of yours is counted.

Pensions are taxable, with a large exclusion from age 62 that is lost above $150,000 of income

Private-sector pensions, federal civil service annuities, and state, local and teachers’ pensions are all taxable in New Jersey and are reported on line 20a of the NJ-1040. A federal civil service pension stays taxable even when part of it rests on credit for military service. Where the retiree paid into the plan with money New Jersey had already taxed, that part comes back tax-free under the Three-Year Rule or General Rule methods in the instructions. (New Jersey Division of Taxation, 2025 Form NJ-1040 instructions)

The pension exclusion on line 28a is what keeps most retirees’ pensions off the tax rolls. A filer who is 62 or older (or disabled under Social Security rules) on the last day of the year, with total income on line 27 of $100,000 or less, can exclude up to $100,000 on a joint return, $75,000 as a single filer or head of household, and $50,000 if married filing separately. On a joint return only the income of the spouse who has reached 62 qualifies. (New Jersey Division of Taxation, 2025 Form NJ-1040 instructions)

Between $100,001 and $125,000 of total income the exclusion drops to 50% of the line 20a amount for joint filers (37.5% single, 25% separate). Between $125,001 and $150,000 it drops again to 25% (18.75% single, 12.5% separate). Above $150,000 there is no exclusion at all. These are steps, not a phase-out: the percentage that applies is set by the bracket the total falls in. (New Jersey Division of Taxation, 2025 Form NJ-1040 instructions)

U.S. military pensions and military survivor benefit payments are exempt regardless of age or income and are not reported on the return. Disability pensions, public or private, are also left off until the year the recipient turns 65, after which they are treated as ordinary pension income. (New Jersey Division of Taxation, 2025 Form NJ-1040 instructions)

IRA and 401(k) withdrawals are taxable but share the same age-62 exclusion

Withdrawals from traditional IRAs and 401(k) plans are reported on line 20a alongside pensions and qualify for the same exclusion. For 401(k) plans, contributions made since January 1, 1984 were not taxed by New Jersey when they went in, so distributions are generally taxable in full. (New Jersey Division of Taxation, 2025 Form NJ-1040 instructions)

IRAs work differently. New Jersey gave no deduction for traditional IRA contributions, so they were taxed in the year they were made and are not taxed again on the way out. Only the earnings, and any amounts rolled in tax-free from an employer plan, are taxable. Worksheet C in the instructions splits each year’s withdrawal into its taxable and excludable parts, which means the New Jersey taxable amount is often smaller than the federal one. The example households on this page ignore that and treat every withdrawal as fully taxable, which overstates the tax for anyone with New Jersey-taxed contributions. (New Jersey Division of Taxation, 2025 Form NJ-1040 instructions)

A Roth conversion is taxable. The instructions say that when an existing IRA is converted to a Roth IRA, any amount that would have been taxable if withdrawn must be included on line 20a. Because it lands on line 20a it is eligible for the pension exclusion, but it also raises total income on line 27, the figure tested against the $100,000, $125,000 and $150,000 lines. Qualified Roth IRA distributions are not reported at all. (New Jersey Division of Taxation, 2025 Form NJ-1040 instructions)

To size a conversion against federal brackets and Medicare surcharges, see the Roth conversion calculator; for required withdrawals, the RMD calculator.

Interest, dividends and capital gains are taxed at ordinary rates

New Jersey has no lower rate for long-term capital gains or qualified dividends. Each is added to total income and taxed through the same brackets as a pension. Interest on direct federal obligations and on New Jersey state and local bonds is exempt; interest on other states’ municipal bonds is taxable. (New Jersey Division of Taxation, 2025 Form NJ-1040 instructions)

The return taxes income by category. Losses can be netted against gains in the same category, but a net loss in one category cannot reduce income in another, and losses cannot be carried back or forward to other years. A realized capital loss that is not used against gains in the same year is simply lost for New Jersey purposes. (New Jersey Division of Taxation, 2025 Form NJ-1040 instructions)

Retirees aged 62 or older can shelter investment income too. If the pension exclusion on line 28a does not use up the maximum for the filer’s income band, Worksheet D lets the unused amount be claimed on line 28b against any other income, provided wages, business, partnership and S corporation income together are $3,000 or less and total income is $150,000 or less. (New Jersey Division of Taxation, 2025 Form NJ-1040 instructions)

Single filers pay 1.4% on the first $20,000 of taxable income, 1.75% to $35,000, 3.5% to $40,000, 5.525% to $75,000, 6.37% to $500,000, 8.97% to $1 million and 10.75% above that. Joint filers pay 1.4% to $20,000, 1.75% to $50,000, 2.45% to $70,000, 3.5% to $80,000, 5.525% to $150,000, 6.37% to $500,000, 8.97% to $1 million and 10.75% above. The brackets are set in statute and are not indexed for inflation. (New Jersey Division of Taxation, 2026 Form NJ-1040-ES instructions (2026 rate schedules, exemptions and filing thresholds))

There is no standard deduction. Each filer and spouse gets a $1,000 regular exemption, and anyone 65 or older on the last day of the year gets a further $1,000, so a couple who are both 65 subtract $4,000. A return is not required, and no tax is due, when New Jersey gross income is $20,000 or less for joint filers or $10,000 or less for single filers. (New Jersey Division of Taxation, 2025 Form NJ-1040 instructions)

The Division of Taxation’s 2026 estimated tax instructions print the same rate schedules, the same $1,000 exemptions and filing thresholds, and the same $150,000 income ceiling for the retirement exclusions as the 2025 return. None of these figures is adjusted annually. The detailed exclusion chart and worksheets on this page are from the 2025 NJ-1040 instructions, the most recent return instructions available on the review date. (New Jersey Division of Taxation, 2026 Form NJ-1040-ES instructions (2026 rate schedules, exemptions and filing thresholds))

Pension exclusion (age 62): up to $100,000 joint, $75,000 single or $50,000 married filing separately of pension, annuity and IRA income when total income is $100,000 or less, stepping down to a percentage of that income up to $150,000 and to nothing above it. (New Jersey Division of Taxation, 2025 Form NJ-1040 instructions)

Other retirement income exclusion (age 62): the unused part of the maximum can be applied to interest, dividends, gains and other income when earned income is $3,000 or less. A retired couple with $70,000 of pension and IRA income and $20,000 of investment income can exclude all $90,000. (New Jersey Division of Taxation, 2025 Form NJ-1040 instructions)

Special exclusion: $6,000 joint or $3,000 single for people who will never be able to receive Social Security or Railroad Retirement because their employer did not take part in either program. (New Jersey Division of Taxation, 2025 Form NJ-1040 instructions)

Age-65 exemption: an extra $1,000 per person aged 65 or older. Unreimbursed medical expenses above 2% of gross income are also deductible, which matters in years with long-term care or large out-of-pocket costs. (New Jersey Division of Taxation, 2025 Form NJ-1040 instructions)

The same three households appear on every state page, so the figures can be compared across states. Each is a full-year resident taking the standard deduction, with no dependents. The figures are state income tax only: any county, city or school district income tax is described on this page but not added in. Pension income is from a private employer, and IRA figures are taxable withdrawals from traditional accounts. The state tax is our calculation from New Jersey's published 2026 rules; it is an illustration, not a return.

These households also owe federal income tax, which does not change with the state. The tax bracket calculator and the guide to taxes in retirement cover that side.

Property tax is the largest state and local tax most New Jersey retirees pay. The Tax Foundation’s 2026 comparison, using 2024 Census data, puts the effective rate on owner-occupied homes at 1.88% of value, the highest of any state. On a $600,000 home that is roughly $11,300 a year, though rates differ sharply between municipalities. (Tax Foundation, Property Taxes by State and County, 2026 (comparative figure))

Three state programs offset part of the bill, and all are applied for on one combined application (Form PAS-1 for those 65 or older). Eligibility and amounts are set each year in the state budget. The total of all relief cannot exceed the property tax actually paid on the home for the year, and each applicant receives a statement showing how the three amounts fit together. (New Jersey Division of Taxation, how ANCHOR benefits are calculated)

The 2023 law that created Stay NJ set the credit at 50% of the property tax bill for homeowners 65 or older with gross income under $500,000, with a maximum of $6,500 in 2026. It entitles an applicant to the greater of the Stay NJ credit or the combined ANCHOR and Senior Freeze amounts, so Stay NJ tops up the other two programs and is not paid in addition to them. (New Jersey Legislature, P.L.2023, c.75 (Stay NJ Act))

The Fiscal Year 2027 budget, signed June 30, 2026, scaled the program back. For the 2025 tax year the income ceiling is $200,000 and the maximum benefit falls as income rises. The state has said the 2026 payments for the 2024 tax year will also come to less than first scheduled. (New Jersey Division of Taxation, Stay NJ property tax credit)

On the income tax return itself, homeowners can deduct up to $15,000 of property tax paid on a principal residence, or take a $50 property tax credit if that is worth more. The example households on this page do not include that deduction because it depends on the home. (New Jersey Division of Taxation, 2025 Form NJ-1040 instructions)

The state sales tax is 6.625% and there are no general county or municipal add-ons. Most groceries, most clothing and footwear, prescription drugs, over-the-counter drugs and household paper products are exempt, which removes much of a retired household’s routine spending from the tax. (New Jersey Division of Taxation, Sales Tax Guide (S&U-4))

Qualified businesses in Urban Enterprise Zones charge half the regular rate. That is why the Tax Foundation shows a slightly negative average local rate for New Jersey and a combined average of 6.60% as of January 2026. (Tax Foundation, State and Local Sales Tax Rates, 2026 (comparative figure))

New Jersey no longer has an estate tax. It was phased out and does not apply to anyone who died on or after January 1, 2018, so the size of an estate by itself creates no New Jersey tax. (New Jersey Division of Taxation, inheritance and estate tax rates)

The inheritance tax remains, and it depends on who inherits. Class A beneficiaries pay nothing: a spouse, civil union or domestic partner, parents, grandparents, children (including adopted children and stepchildren), grandchildren and later descendants. Charities, religious and educational institutions and government bodies (Class E) are also exempt. (New Jersey Division of Taxation, inheritance tax beneficiary classes)

Class C covers brothers and sisters and the spouse or surviving spouse of a child. Their first $25,000 is exempt; the next $1,075,000 is taxed at 11%, the next $300,000 at 13%, the next $300,000 at 14%, and anything over $1.7 million at 16%. Everyone else, including nieces, nephews, friends and unmarried partners who are not registered domestic partners, falls in Class D and pays 15% on the first $700,000 and 16% above it. (New Jersey Division of Taxation, inheritance and estate tax rates)

The tax follows the decedent, not the heir. It applies to a New Jersey resident’s property wherever the beneficiary lives, and to New Jersey real estate owned by someone who lived elsewhere. (New Jersey Division of Taxation, inheritance and estate tax overview)

The federal estate tax applies in every state. The estate tax calculator estimates both the federal tax and any state tax.

Stay NJ was narrowed by the Fiscal Year 2027 Appropriations Act, signed June 30, 2026. The income limit for the 2025 tax year is $200,000 and the maximum benefit is tiered at $6,500, $5,000 and $4,000. The state notes these maximums assume no further change in the FY2028 budget. (New Jersey Division of Taxation, Stay NJ property tax credit)

For the 2025 benefit year ANCHOR pays homeowners $1,500 with income of $150,000 or less and $1,000 up to $250,000. Renters with income of $150,000 or less receive $450, or $700 if 65 or older. (New Jersey Division of Taxation, how ANCHOR benefits are calculated)

The Senior Freeze income limit rose from $168,268 for 2024 to $172,475 for 2025, and since tax year 2024 the age and three-year residency tests are applied to the application year instead of the base year. (New Jersey Division of Taxation, Senior Freeze eligibility requirements)

The income tax brackets, the $1,000 exemptions and the $150,000 ceiling for the retirement exclusions are the same for 2026 as for 2025. Because none of them is indexed, each year of inflation pushes more retirees toward the $100,000 and $150,000 lines. (New Jersey Division of Taxation, 2026 Form NJ-1040-ES instructions (2026 rate schedules, exemptions and filing thresholds))

New Jersey taxes residents on all income wherever it arises. A resident is someone domiciled in the state, and also someone domiciled elsewhere who keeps a permanent home in New Jersey and spends more than 183 days of the year there. A home used only for vacations does not count as a permanent home. Domicile does not change until a person moves with the intent to make the new place their permanent home and to abandon the old one. (New Jersey Division of Taxation, 2025 Form NJ-1040 instructions)

Part-year residents report the income received while resident. For the pension exclusion their income for the whole year must be $150,000 or less, and if it is $100,000 or less the maximum is prorated by the number of months of residence. (New Jersey Division of Taxation, 2025 Form NJ-1040 instructions)

After a move out, New Jersey cannot follow a pension or IRA. Federal law bars any state from taxing the retirement income of someone who is not a resident or domiciliary, covering qualified plans, IRAs, 403(b) and 457 plans and government pensions. A former resident drawing a New Jersey public pension in Florida owes New Jersey nothing on it. (4 U.S.C. 114, limitation on state income taxation of certain pension income)