Taxes in New Jersey: Features and Advantages

Main Taxes in New Jersey

Income Tax:

New Jersey applies a progressive scale of personal income tax.
Rates start at 1.4% and reach 10.75% for income over $1 million. This is one
of the highest rates in the country for high-income residents. At the same time, the state
offers various deductions, including for children, education, rental housing,
as well as benefits for retirees and low-income families.

Sales Tax:

The base sales tax rate in New Jersey is 6.625%, with no local surtaxes,
making it uniform statewide. However, there are Urban Enterprise Zones,
where the rate is reduced to 3.3125% to stimulate business. Sales tax applies
to most goods and a limited list of services, including equipment rentals and hotel services.
Notably, groceries, medicines, clothing, and certain services are exempt.

Our company provides professional assistance in obtaining a Sales Tax Certificate and preparing Sales and Use Tax Returns.

Property Tax:

New Jersey is known for having some of the highest property taxes in the U.S.
The average rate is about 2.21% of assessed value, and can exceed 3% in some counties.
The main reason for such high rates is funding school districts, infrastructure, and local governments.
Assessments are conducted at the municipal level and can vary significantly.

Owners of a primary residence may qualify for tax relief and rebate programs.

Business Taxes:

New Jersey levies a Corporate Business Tax on profits, with a progressive scale depending on income:
6.5% on profits up to $50,000,
7.5% on profits from $50,001 to $100,000,
9% on profits over $100,000.

In addition, the state imposes a Minimum Tax, charged even when no profit is earned, based on gross receipts.
S corporations are taxed at a reduced rate.

All companies doing business in NJ must file an Annual Report through the online portal of the Division of Revenue and Enterprise Services.

If you encounter difficulties filing the Annual Report, our company provides preparation and filing services.

Excise Taxes:

New Jersey levies excise taxes on fuel, alcohol, tobacco, e-cigarettes, car rentals, and gambling.
The state actively regulates sales of these goods, especially regarding licensing and turnover control.
Since 2021, a tax on plastic and disposable electronic products has also been in effect.

Inheritance Tax:

Levied on heirs, with rates depending on their relationship to the decedent and the value of inherited property.

Favorable Tax Conditions in New Jersey:

Despite high tax rates, New Jersey offers favorable conditions for certain categories of businesses.
For example, reduced rates in Urban Enterprise Zones, incentives for manufacturing companies and tech startups,
as well as grants and tax credits for employers creating jobs.

It is also worth noting that unlike some states, New Jersey does not fully tax pension payments
if the taxpayer’s income does not exceed a certain threshold, which can benefit pre-retirement individuals.

High personal income tax rates are partially offset by tax credits: earned income credit, child tax credit,
and homeowner relief programs.

Taxes in New Jersey Compared to Other States:

Compared to other states, New Jersey has the highest corporate tax 9%-11.5% (including a 2.5% surtax on profits over $10 million).
For comparison: California - 8.84%, Illinois - 9.5%.

New Jersey ranks in the top 3 states for high personal income tax, especially for wealthy residents.
The maximum rate is 10.75% (California 13.3%, New York 10.9%).

It is the most expensive state for property tax at 2.21% (Illinois 2%, Florida 0.83%).

However, the sales tax rate is fixed and does not vary by county, simplifying calculations and administration.

As in many other states, New Jersey levies a business tangible personal property tax, requiring asset reporting.