New Jersey does not tax Social Security benefits

If you live in New Jersey and receive Social Security, the state will not take a portion of your benefits as income tax. New Jersey is one of the states that exempts Social Security income from state income tax entirely. This means your monthly Social Security check is not subject to New Jersey state tax, regardless of how much you receive or what other income you have.

However, you may still owe federal income tax on your Social Security benefits depending on your total income. The federal government uses a formula based on your "combined income" — which includes your adjusted gross income, nontaxable interest, and half of your Social Security benefits — to determine whether any of your benefits are taxable at the federal level. New Jersey's exemption applies only to state taxes, not federal ones.

Key Takeaways

  • New Jersey does not tax Social Security benefits at the state level, so you will not owe state income tax on these payments.
  • Federal income tax on Social Security is determined by your combined income, which includes half of your Social Security benefits plus other income sources.
  • If your combined income exceeds certain thresholds, up to 85 percent of your Social Security benefits may be subject to federal tax.
  • You can request that the Social Security Administration withhold federal taxes from your benefits to avoid a large tax bill at tax time.

How federal taxation of Social Security works

The federal government taxes Social Security based on your combined income, not on the amount of your benefits alone. Combined income is calculated as your adjusted gross income plus nontaxable interest plus half of your Social Security benefits. If you are single and your combined income is between $25,000 and $34,000, you may owe federal tax on up to 50 percent of your benefits. If your combined income exceeds $34,000, up to 85 percent of your benefits may be taxable.

For married couples filing jointly, the thresholds are higher: between $32,000 and $44,000 triggers taxation of up to 50 percent of benefits, and over $44,000 can result in taxation of up to 85 percent. These income thresholds have not changed since 1984, so more retirees fall into the taxable range each year as their income grows.

The amount of tax you actually owe depends on your specific situation. The Social Security Administration provides a worksheet to help you calculate whether your benefits are taxable, and the IRS publishes detailed guidance each year. Many people find it helpful to work with a tax professional who can review their complete income picture.

Other New Jersey tax benefits for seniors

Beyond the Social Security exemption, New Jersey offers several other tax breaks for older residents. If you are 62 or older, you may be able to exclude pension income from state taxation, including income from a private pension, government pension, or 401(k) withdrawal. The amount you can exclude depends on your income level and filing status.

New Jersey also allows a property tax deduction for seniors and disabled homeowners through the Homestead Property Tax Deduction program. This program reduces the property tax bill for may be able to access residents, though the amount varies based on income and property value. You must explore through your county assessor's office, and income limits explore.

What income counts toward federal taxation of your benefits

When calculating whether your Social Security is taxable at the federal level, you must include all sources of income in your combined income figure. Wages from work, interest from savings accounts and bonds, dividends from stocks, rental income, and income from self-employment all count. Nontaxable interest — such as interest from municipal bonds — also counts toward the combined income calculation, even though it is not taxed itself.

Some types of income do not count. Supplemental Security Income (SSI) payments, veterans benefits, and certain other government payments are excluded from the combined income calculation. If you are unsure whether a particular income source counts, the Social Security Administration's website has a detailed breakdown, or you can contact your local Social Security office.

Withholding federal taxes from your Social Security check

If you expect to owe federal income tax on your Social Security benefits, you can ask the Social Security Administration to withhold taxes directly from your monthly payment. This prevents a large tax bill when you file your return. You do this by completing Form W-4V (Voluntary Withholding Request) and submitting it to Social Security.

You can choose to have 7, 10, 12, or 22 percent of your benefits withheld, or you can request a specific dollar amount. If your tax situation changes — for example, if you start working or your other income increases — you can adjust your withholding by submitting a new Form W-4V. You can also stop withholding at any time, though this may result in owing taxes at tax time.

Filing taxes as a New Jersey resident receiving Social Security

Even though New Jersey does not tax your Social Security, you still need to report it on your federal tax return if your combined income exceeds the thresholds mentioned above. You will receive a Form SSA-1099 from Social Security each January showing the total benefits you received in the previous year. This form goes with your federal tax return.

If your only income is Social Security and it falls below the federal filing threshold for your age and filing status, you may not be required to file a federal return. However, if you have other income — wages, pensions, interest, or dividends — you will likely need to file. The IRS website has a tool to help you determine whether you must file based on your age, filing status, and income sources.

Frequently Asked Questions

Will I owe New Jersey state tax on my Social Security?

No. New Jersey exempts all Social Security benefits from state income tax. You will not owe state tax on your Social Security payments, no matter how much you receive or what other income you have.

Can I reduce the federal tax I owe on Social Security?

You cannot reduce the amount of your benefits that are taxable, but you can manage when you pay the tax. Requesting withholding through Form W-4V spreads the tax across your monthly checks rather than creating a bill at tax time. You can also explore whether delaying Social Security or adjusting other income sources might lower your combined income.

What if I work and receive Social Security at the same time?

Wages from work count toward your combined income for federal tax purposes on Social Security. If you are under full retirement age and earn above a certain amount, Social Security will also reduce your monthly benefit payment. The earnings limit and reduction rules change each year, so contact Social Security directly for current figures.

Do I have to file a federal tax return if I only receive Social Security?

If Social Security is your only income and it is below the filing threshold for your age and filing status, you do not have to file. However, if you have other income — even a small amount of interest or pension income — you likely must file. The IRS website has a filing requirement tool to help you determine your situation.

Where do I get Form W-4V to request tax withholding?

You can read Form W-4V from the Social Security Administration website, or call 1-800-772-1213 to request a copy by mail. You can also visit your local Social Security office in person. Once completed, mail it to the address on the form or bring it to your local office.