How Much is Sales Taxes in New Jersey

The wonderful New Jersey state has a lot of good things attributed to its name, but certainly not low taxes. There are a lot of taxes, ranging from sales tax, income tax, gas tax, inheritance tax, property tax, and others.

The sales tax in New Jersey is 6.625% and it is placed on most tangible personal property, specified digital products, and certain services except it is specially excluded from the tax law of New Jersey.  

There is a very important factor that should be taken into consideration before you think about collecting sales tax in a state, and it is checking if you have nexus there (nexus refers to the commercial connection in the state). It could be physical or economic.

Physical nexus refers to having enough presence or activity in a state to the point that you will be permitted to pay sales tax in that state whereas economic nexus entails passing a state’s economic benchmark for total revenue.

You will learn about the New Jersey sales tax and inheritance tax as you read, and many tax-related questions will be answered. 

Why you Should Know about State Taxes in New Jersey

State taxes in New Jersey are a tax imposed by the state on the residents of the state, and for those who don’t reside there, it is imposed based on the income earned or activities carried out while in the state. 

It is critical to understand New Jersey’s state tax so that you are aware of the taxes you will be subjected to when you enter the state, as well as any rules or exceptions.

New Jersey Income Taxes

Income tax rates are based on income tax brackets. Each income tax bracket is given a specified rate. Below are the brackets and rates for filers in New Jersey.

Single Filers

New Jersey Taxable Income And Rate

• $0 – $20,000 – 1.400%
• $20,000 – $35,000 – 1.750%
• $35,000 – $40,000 – 3.500%
• $40,000 – $75,000 – 5.525%
• $75,000 – $500,000 – 6.370%
• $500,000 – $1,000,000 – 8.970%
• $1,000,000 and more – 10.750%

Married, Filing Jointly

New Jersey Taxable Income And Rate

• $0 – $20,000 – 1.400%
• $20,000 – $50,000 – 1.750%
• $50,000 – $70,000 – 2.450%
• $70,000 – $80,000 – 3.50%
• $80,000 – $150,000 – 5.525%
• $150,000 – $500,000 – 6.370%
• $500,000 -$1,000,000 – 10.750%

Married, Filing Separately

New Jersey Taxable Income And Rate

• $0 – $20,000 – 1.400%
• $20,000 – $35,000 – 1.750%
• $35,000 – $40,000 – 3.500%
• $40,000 – $75,000 – 5.525%
• $75,000 – $500,000 – 6.370%
• $500,000 – $1,000,000 – 8.970%
• $1,000,000 and more – 10.750%

Head of Household

New Jersey Taxable Income And Rate

• $0 – $20,000 – 1.400%
• $20,000 – $50,000 – 1.750%
• $50,000 – $70,000 – 2.450%
• $70,000 – $80,000 – 3.500%
• $80,000 – $150,000 – 5.525%
• $150,000 – $500,000 – 6.370%
• $500,000 – $1,000,000 – 8.970%
• $1,000,000 and more – 10.750%

There are some incomes that are not taxable, and they include unemployment compensation, Social Security benefits, workers’ compensation, and lottery winnings of $10,000 or less. Also, expenses like unreimbursed medical expenses, New Jersey property taxes, Archer MSA contributions, and health insurance payments (if you’re self-employed) can be subtracted. 

You need to note that all of the tax rates stated above are applicable to New Jersey taxable income, which is total income (including capital gains) minus some deductions and the New Jersey personal exemption of $1,000.

New Jersey Sales Tax

On Jan. 1, 2018, the sales tax rate in New Jersey dropped from 6.875% to 6.625%. Sales tax rates in New Jersey are levied on most products and services, including electronics, furniture, fitness club memberships, parking, landscaping services, and digital property (e.g. electronically downloaded music etc.). However, some items such as groceries, prescriptions, and over-the-counter drugs, and most types of clothing and footwear are exempted.

The flat sales tax rate of 6.625% entails that wherever you are in the state, you will pay the same rate though this comes with two major exceptions. First, there is something called New Jersey’s “Urban Enterprise Zones,” and here, goods which are bought at qualified business places are subject to a reduced sales tax rate of 3.3125%. There are almost 40 Urban Enterprise Zones in New Jersey, including parts of Newark, Trenton, Camden, and more (as of May 30, 2018).

The second exception to sales tax for New Jersey is Salem County. In this county, most of the goods bought are faced with a reduced sales tax rate of 3.3125% though some items like alcoholic beverages, cigarettes, motor vehicles, services, and any transactions made from outside the county are not entitled to that reduced sales tax rate.

New Jersey Property Tax

Property taxes can be subtracted from your New Jersey income tax return. The property tax rate is 2.42%, and this means that homeowners in New Jersey pay nearly 2.50% of their home value in property taxes each year. New Jersey actually has the highest property tax rate in the country.

Before 2018, the maximum property tax deduction was $10,000 but from 2018, it reduced to $15,000.

New Jersey Cigarette Tax

In New Jersey, taxes of $2.70 are taken for each pack of 20 cigarettes.

New Jersey Inheritance and Estate Tax

The inheritance tax rate range is from 11% to 16% and is only imposed on beneficiaries who are not one of the following in relation to the deceased: mother, father, grandparent, spouse, civil union partner, child, grandchild, great-grandchild, stepchild, or domestic partner. 

This implies that siblings, close friends, or step-parents are expected to pay the inheritance tax, although the first $25,000 of the inheritance is excluded for these persons. Anyone outside of these groups will not get any exemption. There is no more estate tax in New Jersey.

How much is Sales Tax in New Jersey?

New Jersey’s sales tax has a rate of 6.625%. However, there are about 309 local tax jurisdictions (including cities, towns, counties, and special districts) that take an average local sales tax of 0.003% in addition to this tax. With this information, it can be deduced that the total tax you pay can be slightly higher than the 6.625% state sales tax, depending on your location.

People also search for Income Tax Rate for New York

Sales Taxes in New Jersey Calculator

As soon as you get the right sales tax rate for your area, the next thing is to know how much to charge each client for the goods bought.

For you to get an adequate sales tax in New Jersey, you will need to add up the state, county, and city rates for your location. 

The sales tax formula is given below: 

Sales tax = total amount of sales x sales tax rate

You can use this to get the tax detail you need.

What is the Income Taxes in New Jersey?

The income tax in New Jersey has either seven or eight income tax rates for the 2022 – 2023 filing period and they are 1.4%, 1.75%, 2.45%, 3.5%, 5.525%, 6.37%, 8.97%, 10.75% for Single, Married Filing Jointly, Married Filing Separately, and Head of Household levels.

In 2018 the New Jersey tax rate of 10.75% on income over $5 million was added but in 2020 the top bracket of over $5 million was reduced to $1 million meanwhile the rates and other brackets were not changed. The New Jersey rates and brackets still remain unchanged for this year and hopefully, the 2023 New Jersey income tax rate will still be the same.

The income tax rate and tax brackets shown below are actually based on income earned between January 1, 2022, through December 31, 2022.

Single Filers

New Jersey Taxable Income and Rate

• $0 – $20,000 – 1.400%
• $20,000 – $35,000 – 1.750%
• $35,000 – $40,000 – 3.500%
• $40,000 – $75,000 – 5.525%
• $75,000 – $500,000 – 6.370%
• $500,000 – $1,000,000 – 8.970%
• $1,000,000 and more – 10.750%

Married, Filing Jointly

New Jersey Taxable Income and Rate

• $0 – $20,000 – 1.400%
• $20,000 – $50,000 – 1.750%
• $50,000 – $70,000 – 2.450%
• $70,000 – $80,000 – 3.50%
• $80,000 – $150,000 – 5.525%
• $150,000 – $500,000 – 6.370%
• $500,000 -$1,000,000 – 8.970%
• $1,000,000 and more – 10.750%

Married, Filing Separately

New Jersey Taxable Income and Rate

• $0 – $20,000 – 1.400%
• $20,000 – $35,000 – 1.750%
• $35,000 – $40,000 – 3.500%
• $40,000 – $75,000 – 5.525%
• $75,000 – $500,000 – 6.370%
• $500,000 – $1,000,000 – 8.970%
• $1,000,000 and more – 10.750%

Head of Household 

New Jersey Taxable Income and Rate

• $0 – $20,000 – 1.400%
• $20,000 – $50,000 – 1.750%
• $50,000 – $70,000 – 2.450%
• $70,000 – $80,000 – 3.50%
• $80,000 – $150,000 – 5.525%
• $150,000 – $500,000 – 6.370%
• $500,000 -$1,000,000 – 8.970%
• $1,000,000 and more – 10.750%

From the information above, it is noted that there is an increase in income tax rates from the lowest tax rate bracket of 1.4% to the highest tax rate bracket of 10.75%. Also, it is seen that the tax rate and tax brackets taken from individual income are different for the single versus married filing levels.

For the Married Filing Jointly and Head of Household filing statuses, an extra tax rate (which is the eighth tax rate) and income tax bracket appears. 

How much is the Sales Tax in New Jersey on Cars?

A sales tax rate is placed on all vehicle purchases, both new and used, and you also have to pay county or local sales tax (if available). The statewide car sales tax in New Jersey is 6.625%.

There are very few cases of additional county sales tax; however, the highest sales tax rate for car purchases is found in Cumberland County, where customers are caught up with an 8.625% combined sales tax rate. Apart from this, every other county in New Jersey has a combined sales tax rate of 6.625%. 

Gas Taxes In New Jersey

“Gas tax” or the “highway fuels tax” is actually two separate taxes on gasoline and diesel fuel – the Motor Fuels tax and the Petroleum Products Gross Receipts (PPGR) tax.

The tax was 14.5 cents per gallon in 2016 before an agreement between Governor Chris Christie( the governor that year) and Democratic lawmakers suddenly raised it to 22.6 cents and permitted annual increases. Under the law signed by Christie, state officials are expected to check every August if the revenue obtained from the gas tax will be able to keep the state’s transportation fund from running at loss.

In a bid to ensure the state has the money necessary to support these projects, the law states that the Petroleum Products Gross Receipt tax rate must be modified to raise at least $2 billion per year and it must be examined annually.

On October 1, the PPGR tax rate will decrease from 31.9 cents to 30.9 cents for gasoline and from 35.9 cents to 34.9 cents for diesel fuel. It will be added to Motor Fuels Tax, which is fixed at 10.5 cents for gasoline and 13.5 cents for diesel fuel, then the total gas tax rates that motorists will pay for gasoline and diesel fuel will be 41.4 cents and 48.4 cents, respectively.

Thus, this year’s examination will definitely bring the state gas tax to 41.4 cents for gasoline and 48.4 cents for diesel fuel.

Mansion Tax in New Jersey

New Jersey imposes an extra fee of 1% of a property’s sales price on properties that are sold for more than $1 million. This extra fee is called “mansion tax.” 

Who Pays the Mansion Tax in New Jersey?

You or your buyer will pay a minimum of $10,000 to satisfy the New Jersey mansion tax.

This tax is placed on both Class 2 and Class 4A commercial properties, which include residential properties (including single-family homes), office buildings, and most conventional commercial properties. 

This tax is to be paid to the county clerk when land is bought, at the time the deed is recorded. However, this is subject to change if the client and the vendor have decided to shift the responsibility. The mansion tax is a free-will transaction tax, so the parties involved have the right to decide the particulars of their contract.

Exemptions From the New Jersey Mansion Tax

Some purchases are exempted from the mansion tax. This includes:

• Purchases of apartment buildings that house multiple families 
• Purchase of industrial sites
• Purchase of vacant lots (though they can run up over $1 million) depending on the land area
• Nonprofit organizations purchase

Inheritance Tax in New Jersey

If you reside in New Jersey or own real estate or tangible property situated in New Jersey, the people who inherit your property may have to pay a tax on the amount they inherit. The amount they will have to remit depends on how closely they are related to you; the closer the family connection, the lower the inheritance tax rate.

New Jersey Inheritance Tax Rates and Exemptions

In New Jersey, inheritors are classified into different groups based on their family relationship with the deceased.

Class A beneficiaries are excluded from the inheritance tax. They include:

• spouse, domestic partner, or civil union partner
• parent or grandparent
• child (biological, adopted, or mutually acknowledged)
• stepchild (but not step-grandchild or great-step-grandchild)
• a grandchild or another lineal descendant of a child

Class B was removed when the New Jersey law changed.

On amounts greater than $25,000, Class C remits inheritance tax. Note that the first $25,000 of property inherited by someone in Class C is not taxed. This group includes the deceased person:

• brother or sister
• child’s spouse or civil union partner
• child’s surviving spouse or civil union partner (if the deceased person’s child is deceased)

As earlier said, amounts up to $25,000 are not taxed. The rate of tax depends on the amount inherited. After that, the rates are as follows:

• Next $1,075,000: 11%
• Next $300,000: 13%
• Next $300,000: 14%
• Over $1,700,000: 16%

Class D consists of everyone who doesn’t fall into Classes A, C, or E. The tax rates are:

• First $700,000: 15%
• Over $700,000: 16%

Class E beneficiaries are excluded from inheritance tax. Political subdivisions for public or charitable purposes, educational institutions, churches, hospitals, and public libraries are in this group.

Other Inheritance Tax Exemptions

There are other inheritance taxes irrespective of the class of the beneficiary. Hence the New Jersey inheritance tax is not applied on:

• transfers of less than $500
• life insurance proceeds paid to a named beneficiary
• payments from the New Jersey Public Employees Retirement System, the New Jersey Teachers’ Pension and Annuity Fund, or the New Jersey Police and Firemen’s Retirement System
• federal Civil Service Retirement benefits payable to a beneficiary other than the deceased person’s estate
• annuities payable by the U.S. government under the Retired Serviceman’s Family Protection Plan or the Survivor Benefit Plan to a beneficiary other than the estate

Inheritance Tax Waivers

If no tax is due, someone who is a Class A beneficiary can file an Affidavit for Real Property Tax Waiver then if the waiver is accepted, an inheritance tax return doesn’t have to be filed. Also if inheritance tax is not paid and the state does not issue any tax waiver, some property can’t be moved out of the estate.

Conclusion

New Jersey places an average sales tax of 6.625% on sales of most tangible personal property, specified digital products, and certain services, except that it is excluded under New Jersey law. You need to know your commercial connection and then have in-depth knowledge of taxable products, their exemptions, and how to register for sales tax in New Jersey.

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