Overview of New Jersey Taxes
The Garden State has a progressive income tax system. The rates, which vary depending on income level and filing status, range from 1.40% to 10.75%. The top tax rate in New Jersey is one of the highest in the U.S.
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New Jersey Paycheck Calculator
New Jersey Paycheck Quick Facts
- New Jersey income tax rate: 1.40% - 10.75%
- Median household income: $88,559 (U.S. Census Bureau)
- Number of cities with local income taxes: 0
How Your New Jersey Paycheck Works
Your New Jersey employer is responsible for withholding FICA taxes and federal income taxes from your paychecks. Medicare and Social Security taxes together make up FICA taxes. Your employer will withhold 1.45% of your wages for Medicare taxes each pay period and 6.2% in Social Security taxes. Your employer matches your Medicare and Social Security contributions, so the total payment is doubled. Any wages you earn in excess of $200,000 is subject to a 0.9% Medicare surtax, which is not matched by your company.
Federal income taxes are also withheld from each of your paychecks. Your employer uses the information that you provided on your W-4 form to determine how much to withhold in federal income tax each pay period. Several factors - like your marital status, salary and additional tax withholdings - play a role in how much is taken out from your wages for federal taxes.
The new version of the W-4 includes major changes from the IRS. Most notably, this involves the removal of allowances. Instead, it requires you to enter annual dollar amounts for things such as non-wage income, income tax credits, total annual taxable wages and itemized and other deductions. The revised form also features a five-step process that lets you enter personal information, claim dependents and indicate additional income and jobs.
New Jersey has a progressive income tax system, in which the brackets are dependent on a taxpayer's filing status and income level. As a result, the state's income tax is structured similarly to the federal income tax system.
If you are single or married and filing separately in New Jersey, there are seven tax brackets that apply to you. At the lower end, you will pay at a rate of 1.40% on the first $20,000 of your taxable income. Meanwhile, the highest tax bracket reaches 10.75% on income over $1 million.
On the other hand, there are eight tax brackets for married people who file jointly and heads of household. The lowest and highest rates are the same as for other filers, ranging from 1.40% to 10.75%. However, there's an extra bracket from $50,000 to $70,000 that has a 2.45% rate associated with it.
If you're an employee in Newark, it’s important to know that while the city has a 1% payroll tax, it applies to employers, not workers. Therefore, no New Jersey cities levy local income taxes.
A financial advisor can help you understand how taxes fit into your overall financial goals. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
How You Can Affect Your New Jersey Paycheck
Most people want a bigger paycheck, and you can certainly take steps toward that - for instance, by asking for a raise or by working extra hours (if you are eligible for overtime). But while it’s always nice to increase your earnings, there are times when it might be smart to shrink your actual paycheck. If you elect to put more money into a pre-tax retirement account like a 401(k) or 403(b), for instance, you will save for the future while lowering your taxable income. The money that you put into a 401(k) or 403(b) comes out of your paycheck before taxes are applied, so by putting more money in a retirement account, you are paying less money in taxes right now. So, while you will receive a smaller paycheck each month, you will actually get to keep more of your salary this way.
Another reason that you might elect to receive a smaller paycheck is if you always find yourself paying a tax bill in April. If this is the case, you may be underpaying your taxes all year. One way to fix this is to ask your employer to withhold an additional dollar amount from your paychecks, say $50 per paycheck. Ultimately you will pay the same amount in taxes, but this way you’re spreading the tax payments out and paying a little more each pay period, instead of paying it all in a lump sum come tax season.