# Retirement Taxes in New Jersey (2026)

> Does New Jersey tax Social Security, pensions or 401(k) withdrawals? The 2026 rules, rates, and what the state tax actually costs a retiree.

Source: https://savingslast.com/retirement-taxes-in-new-jersey/
Markdown: https://savingslast.com/retirement-taxes-in-new-jersey.md
Site: SavingsLast, free retirement drawdown calculators. Educational estimates, not advice.

**Very tax-friendly.** Income tax: graduated, 1.4%–10.75%. Social Security: not taxed. Retirement account withdrawals: covered by the same exclusion.

*Interactive calculator on the page: https://savingslast.com/retirement-taxes-in-new-jersey/. The same engine is the MCP tool how_long_will_money_last at https://savingslast.com/mcp.*

Seeded with roughly 10% — about 10% effective federal plus 0%, the New Jersey tax on $40,000 of IRA withdrawals at 65 under 2026 rules. Change it to your own rate.

## What New Jersey taxes in retirement

| State income tax | Graduated, 1.4%–10.75% |
| --- | --- |
| Social Security | Not taxed |
| 401(k) and IRA withdrawals | Covered by the same exclusion |
| Pensions | Retirement income exclusion at 62+ of up to $75,000 single / $100,000 joint at income up to $100,000, partial up to $150,000 |
| Military retirement pay | Not taxed — military pensions are not New Jersey income at any age |
| Estate or inheritance tax | Inheritance tax — spouses, children and grandchildren exempt; the estate tax was repealed in 2018 |
| Average combined sales tax | 6.6% |
| Average effective property tax | 1.88% of home value |

New Jersey’s retirement exclusion, up to $100,000 for a couple, is one of the largest anywhere, and it makes the state genuinely tax-friendly for retirees under the income threshold. Then the property tax arrives: tied with Illinois for the highest effective rate in the United States.

## What the state tax actually costs you

Nothing. On a $500,000 balance withdrawn at $2,500 a month, federal tax alone brings the money down to about **18.8 years**, and New Jersey adds none of its own. Every dollar of state tax a retiree avoids is a dollar that stays invested and compounds, which is why the difference between states widens over a long retirement rather than staying flat.

## The taxes that are not income tax

Retirees feel sales and property tax more than working-age households do, because a larger share of a fixed income goes on spending and on staying in a house that is already owned. New Jersey charges an average combined sales tax of about **6.6%** and levies an average effective property tax of about **1.88%** of a home's value, which is above the national average.

On death: inheritance tax — spouses, children and grandchildren exempt; the estate tax was repealed in 2018. State thresholds are frequently far below the federal exemption, so an estate that owes nothing federally can still owe here — a house plus a retirement portfolio is often enough to cross the line.

## How long $500,000 lasts here

Take a single 67-year-old with $500,000 in an IRA, the average Social Security check and $4,000 a month of spending. In New Jersey that money runs out at 94, the same as in a state with no income tax. Counting New Jersey's prices as well, it runs out at 87 and 11 months. [How long $500,000 lasts in every state](https://savingslast.com/how-long-500k-lasts-in-every-state/) compares all 51.

## Should you move for the tax?

Compare the whole burden rather than one line of it. States without an income tax raise the money elsewhere — Texas and New Hampshire through property tax, Tennessee and Washington through sales tax — so the saving is often smaller than the headline suggests. Run your own numbers in the calculator above, then look at what the same house costs in each state, what insurance costs, and how far you would be from family and from the specialists you already use.

Establishing residency is also a formal exercise, not a preference: high-tax states audit departing retirees on days present, driver's licence, voter registration, where the primary home is, and where a doctor and a dentist are. Half-measures lose.

## Frequently asked questions

**Does New Jersey tax Social Security benefits?**

Not taxed. Your benefit may still be taxable federally once provisional income crosses the limits — see [is Social Security taxable](https://savingslast.com/is-social-security-taxable/).

**Does New Jersey tax 401(k) and IRA withdrawals?**

Covered by the same exclusion. Pensions are treated separately — Retirement income exclusion at 62+ of up to $75,000 single / $100,000 joint at income up to $100,000, partial up to $150,000.

**Does New Jersey tax military retirement?**

Not taxed — military pensions are not New Jersey income at any age. See [which states do not tax military retirement](https://savingslast.com/which-states-dont-tax-military-retirement/).

**Is New Jersey a good state to retire in for taxes?**

Very tax-friendly on income tax. A 65-year-old single filer pays about 0% in state income tax on $40,000 a year of IRA withdrawals under the 2026 rules. Average combined sales tax is about 6.6% and effective property tax about 1.88% of home value. Estate or inheritance tax: inheritance tax — spouses, children and grandchildren exempt; the estate tax was repealed in 2018.

**Does New Jersey have an estate or inheritance tax?**

Inheritance tax — spouses, children and grandchildren exempt; the estate tax was repealed in 2018. This is separate from the federal estate tax and often has a much lower threshold, so it can reach estates that owe nothing federally.

## Other tax-friendly states

- [Alaska](https://savingslast.com/retirement-taxes-in-alaska/)
- [Colorado](https://savingslast.com/retirement-taxes-in-colorado/)
- [Connecticut](https://savingslast.com/retirement-taxes-in-connecticut/)
- [Florida](https://savingslast.com/retirement-taxes-in-florida/)
- [Georgia](https://savingslast.com/retirement-taxes-in-georgia/)
- [Illinois](https://savingslast.com/retirement-taxes-in-illinois/)

## Compare and calculate

- [All 51 states compared](https://savingslast.com/retirement-taxes-by-state/)
- [States that tax Social Security](https://savingslast.com/social-security-taxes-by-state/)
- [Is Social Security taxable?](https://savingslast.com/is-social-security-taxable/)
- [Retirement withdrawal calculator](https://savingslast.com/retirement-withdrawal-calculator/)
- [How long $500k lasts](https://savingslast.com/how-long-will-500k-last-in-retirement/)
- [How much do I need to retire?](https://savingslast.com/how-much-do-i-need-to-retire-with-social-security/)

SavingsLast calculators are educational estimates. They assume a constant average return and steady inflation; real markets are volatile and sequence-of-returns risk can shorten how long money lasts. Nothing here is financial, investment, tax, or legal advice. Consult a qualified professional before making decisions.

Reviewed for the 2026 tax year. Several states are part-way through scheduled rate cuts or phase-outs, and thresholds are often indexed annually — confirm current figures with the New Jersey tax agency (listed at [taxadmin.org](https://taxadmin.org/state-tax-agencies/)) or a tax professional before acting. The effective rate is a planning figure, not a filing figure.