TaxtirementState guides · NJ
How New Jersey taxes retirement income
- New Jersey doesn't tax Social Security benefits.
- Exclusions and subtractions for retirement income (details below):
- Pension/Retirement Exclusion: from age 62, income limits apply.
- Other Retirement Income Exclusion, Part 1: unclaimed pension exclusion: from age 62, income limits apply.
- Other Retirement Income Exclusion, Part 2: special exclusion: from age 62.
- Rates for 2026: 1.4% to 10.75%, graduated.
At a glance
| Income tax | Yes |
|---|---|
| Rates (2026) | 1.4% to 10.75%, graduated |
| Starts from | Its own definition of income (not the federal return) |
| Personal exemption | $1,000 per person |
| Age 65 and older | $1,000 extra exemption per person |
| Social Security | Not taxed |
| Retirement income exclusions | 3 (see below) |
| Roth conversions | Taxable |
| Capital gains | Taxed like other income |
| Local income tax | None |
Tax rates
Brackets apply to New Jersey taxable income. Other filing statuses are in the rules reference.
Single
| Rate | Taxable income |
|---|---|
| 1.4% | $0 to $20,000 |
| 1.75% | $20,000 to $35,000 |
| 3.5% | $35,000 to $40,000 |
| 5.525% | $40,000 to $75,000 |
| 6.37% | $75,000 to $500,000 |
| 8.97% | $500,000 to $1,000,000 |
| 10.75% | $1,000,000 and up |
Married filing jointly
| Rate | Taxable income |
|---|---|
| 1.4% | $0 to $20,000 |
| 1.75% | $20,000 to $50,000 |
| 2.45% | $50,000 to $70,000 |
| 3.5% | $70,000 to $80,000 |
| 5.525% | $80,000 to $150,000 |
| 6.37% | $150,000 to $500,000 |
| 8.97% | $500,000 to $1,000,000 |
| 10.75% | $1,000,000 and up |
Social Security
New Jersey doesn't tax Social Security benefits.
Pensions, IRAs and 401(k)s
Pension/Retirement Exclusion (NJ-1040 line 28a)
Taxpayer (and/or spouse if joint) must be 62 or older, or blind/disabled under Social Security guidelines, on the last day of the tax year. Exclusion = lesser of (A) taxable pension/annuity/IRA income on line 20a of the qualifying spouse(s) only and (B) the chart amount above. On a joint return where only one spouse qualifies, only that spouse's line-20a income can be excluded, but the full joint cap applies. Step-down is a percentage of the qualifying pension income, not of the cap. Example (GIT-1&2): MFJ total income $127,000, qualifying spouse's pension $10,000 -> exclusion 25% x 10,000 = $2,500.
Income limit: Based on NJ Total Income (line 27, all taxable income before the exclusion; Social Security is not in it). Per-RETURN cap: $0-$100,000 total income: up to $100,000 MFJ / $75,000 single, HOH, qualifying widow(er) / $50,000 MFS. $100,001-$125,000: 50% (MFJ) / 37.5% (single, HOH, QW) / 25% (MFS) of line 20a pension income. $125,001-$150,000: 25% / 18.75% / 12.5% of line 20a. Over $150,000: $0 (hard cliff).
Other Retirement Income Exclusion, Part 1: unclaimed pension exclusion (NJ-1040 line 28b, Worksheet D)
Must be 62+ on the last day of the tax year (the 62+ spouse's income only, if joint). Unclaimed amount = maximum exclusion for filing status/income minus the line-28a pension exclusion actually claimed. Worksheet D maximum: $100,000 MFJ / $75,000 single-HOH-QW / $50,000 MFS if line 27 <= $100,000; if $100,001-$125,000: 50% / 37.5% / 25% of LINE 27; if $125,001-$150,000: 25% / 18.75% / 12.5% of LINE 27. Can reduce NJ gross income to zero (GIT-1&2 example: MFJ both 63, $85,000 total income, no pension -> $85,000 excluded).
Income limit: Total income (line 27) must be $150,000 or less AND combined earned income (wages, net business profits, partnership share, S-corp share: lines 15+18+21+22) must be $3,000 or less; above $3,000 the unclaimed exclusion is lost entirely.
Other Retirement Income Exclusion, Part 2: special exclusion (line 28b)
$6,000 (MFJ, HOH, QW) or $3,000 (single, MFS) per return, only if the taxpayer (and spouse if joint) will NEVER be eligible for Social Security or Railroad Retirement benefits (employer did not participate). Not applicable to a typical Social Security household.
Roth conversions
A Roth conversion counts as taxable income for New Jersey. Whether a retirement income exclusion can cover part of it depends on the rules above.
Capital gains
Taxed like other income, at the rates above. . NJ does not allow a net loss in one income category to offset income in another, and has no capital loss carryforward; a net loss in the category is treated as zero.
Credits and relief for older residents
- Property Tax Deduction or Credit (line 41 / line 56). Homeowners/tenants may deduct up to $15,000 of property taxes paid ($7,500 if MFS maintaining same home), or take a $50 refundable credit instead; taxpayers 65+ or blind/disabled get the $50 credit even if not otherwise required to file (Form NJ-1040-HW). 18% of rent is treated as property tax. Engine should pick the better of deduction vs. credit.
- State property-tax relief programs (outside the income tax). ANCHOR, Senior Freeze (PTR) and Stay NJ (65+ homeowners; FY2027 budget revised benefits to $4,000-$6,500 max depending on income) are separate programs with their own income limits; not part of the income tax calculation.
More detail from our research notes
NJ has its own income definition (not federal AGI): NJ Gross Income = sum of taxable income categories (wages, interest, dividends, net gains, pensions/annuities/IRA withdrawals, etc.) minus the line 28 exclusions; then subtract exemptions and deductions (medical expenses over 2% of gross income, property tax deduction, etc.). There is NO standard deduction; itemizedAllowed=false here because NJ has no general itemized deduction (only specific deductions). Exemptions: $1,000 each for taxpayer and spouse; additional $1,000 each if 65 or older on the last day of the tax year (born 1961 or earlier for 2026); additional $1,000 if blind/disabled; $6,000 veteran exemption. Social Security and Railroad Retirement benefits are not taxable and are excluded from total income (they do not count toward the $100k/$150k tests). IRA withdrawals use a basis-recovery method (Worksheet C): contributions previously taxed by NJ (most IRA contributions, since NJ never allowed the deduction) are recovered pro rata: taxable portion = withdrawal x (IRA value incl. withdrawals - unrecovered contributions) / (IRA value incl. withdrawals); in the year the whole IRA is withdrawn, all earnings are taxable. NJ taxable amounts can therefore be LOWER than federal. Roth conversions: the part of the converted amount that would be taxable if withdrawn (earnings, pre-tax rollovers) is included on line 20a in the conversion year, so it counts as pension/IRA income for the line-28a exclusion and toward line 27 total income (a large conversion can blow through the $150,000 cliff and wipe out the whole exclusion). Qualified Roth distributions are excluded. 401(k): employee elective deferrals made since 1984 were taxed by NJ when earned, so they form basis (pension Worksheet A/B three-year or general rule). Rates and brackets are fixed in statute and NOT indexed; the 2026 Form NJ-1040-ES prints the same schedules as 2025; the FY2027 budget (signed June 30, 2026) did not change income tax rates. Exclusion thresholds are also statutory and not indexed.
Pending confirmation
These points were still being confirmed against New Jersey's published 2026 forms when this page was built. Most are waiting on forms the state publishes around the turn of the year.
2 items
- 2026 NJ-1040 instructions not yet published (expected Jan 2027, https://www.nj.gov/treasury/taxation/prntgit.shtml); rates confirmed from the 2026 NJ-1040-ES; exclusion rules from 2025 instructions, the January 2026 GIT-1&2 and N.J.S.A. 54A:6-10/6-15 (statutory, not indexed, last amended 2021).
- Property tax deduction cap ($15,000) and $50 credit taken from 2025 instructions (statutory, not indexed); confirm on the 2026 NJ-1040 instructions (Jan 2027).
Sources
Every figure comes from these documents, mostly the state's own forms, instructions and statutes.
- 2025 NJ-1040 instructions: line 28a pension exclusion chart and eligibility, Worksheet D ORIE, special exclusion, $1,000 exemptions incl. Senior 65+, Worksheet C IRA basis recovery, Roth conversion treatment, tax table and rate schedules (Tables A/B),…https://www.nj.gov/treasury/taxation/pdf/current/1040i.pdf
- 2026 Form NJ-1040-ES: 2026 tax rate schedules (Table A single/MFS, Table B MFJ/HOH/QW), unchanged from 2025https://www.nj.gov/treasury/taxation/pdf/current/1040esi.pdf
- GIT-1 & 2 Retirement Income (January 2026): pension exclusion examples incl. one-spouse and $127,000 step-down example, ORIE conditions ($150,000, $3,000 earned income), Roth conversion ruleshttps://www.nj.gov/treasury/taxation/pdf/pubs/tgi-ee/git1&2.pdf
- Treasury: FY2027 budget signed June 30, 2026 (income tax rates unchanged; Stay NJ revised); NJ Treasury, FY2027 budget signed (July 1 2026): no individual income tax rate changes; Child Tax Credit +25% TY2026-2028; Stay NJ restructured (outside the income tax)https://www.nj.gov/treasury/news/2026/07012026.shtml
- N.J.S.A. 54A:6-15 (other retirement income exclusion; Justia 2025 compilation, last amended L.2021 c.129): in the $100,001-$125,000 and $125,001-$150,000 bands the exclusion is a percentage of (gross) income, matching NJ-1040 Worksheet D's '% of line 27'…https://law.justia.com/codes/new-jersey/title-54a/section-54a-6-15/
Taxtirement's New Jersey calculation is also checked against a second, independent implementation on 1,000 random households. How we check our numbers.
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This page summarizes New Jersey's 2026 rules as Taxtirement applies them, for education and planning. It isn't tax advice, and it doesn't cover every situation (for example part-year residents, businesses or military-only provisions). Rules change; check the state's current instructions, or a tax professional, before you act. Spotted something wrong? Tell us.