What Is Exempt From New Jersey Income Taxes?
New Jersey assesses state income tax, but New Jersey taxpayers do not have to pay state income tax on any income that the state considers tax-exempt. At the date of publication, certain types of benefits and investment income are among the types of income that New Jersey does not tax.
Unemployment insurance payments and Social Security payments are not taxed in New Jersey. Other tax-exempt benefits include worker's compensation payments, federal railroad retirement benefits, American military pensions and military survivor's benefits, permanent and temporary disability payments -- including family leave pay, earned income tax credits and welfare benefits. Military housing allowances, mustering-out pay and subsistence benefits are exempt. Federal and state homestead benefits and housing subsidies, including FAIR and NJ Saver rebates and property tax reimbursements, are also not taxable.
All forms of assistance received from a charitable organization are tax-exempt, as are gifts and inheritances. Life insurance payments to survivors are not taxable, and neither are child support benefits. Sick pay from any public or private source is exempt, and employee death benefits are not taxed.
Interest from investment in bonds and other obligations held by the State of New Jersey or any other political entity in New Jersey, such as a county or municipality, are not subject to state income tax. Federal bond interest is also exempt, as are distributions from investment funds that hold 80 percent or more of their assets in Federal or New Jersey obligations. Income from sale of tax-exempt obligations is also not taxable. However, tax-exempt interest must be listed on a New Jersey tax return. As of this writing, taxpayers must submit a separate schedule of such income if it exceeds $10,000.
All taxpayers are entitled to an automatic $1,000 personal exemption. Taxpayers who are over 65, blind or disabled can claim an additional $1,000 exemption as of this writing. New Jersey allows a $1,500 deduction for each child whom taxpayers claim as a dependent on their federal income tax returns. New Jersey lottery winnings under $10,000 are also exempt from state income tax.
- State of New Jersey: Department of the Treasury: Division of Taxation: NJ Income Tax-Nontaxable Income
- New Jersey Division of Taxation: Tax Topic: Exempt Obligations
- State of New Jersey: Department of the Treasury: Division of Taxation: Military Personnel
- State of New Jersey: Department of the Treasury: Division of Taxation: NJ Income Tax - Personal Exemptions
- State of New Jersey: Department of the Treasury: Division of Taxation: NJ Income Tax - Dependent Exemptions
John DeMerceau is an American expatriate entrepreneur, marketing analyst and Web developer. He now lives and works in southeast Asia, where he creates websites and branding/marketing reports for international clients. DeMerceau graduated from Columbia University with a Bachelor of Arts in history.