Retirement Taxes in New Jersey (2025)
Very tax-friendly. Income tax: graduated, 1.4%–10.75%. Social Security: not taxed. Retirement account withdrawals: covered by the same exclusion.
Seeded with roughly 10% — about 10% effective federal plus an estimated 0% New Jersey tax on retirement withdrawals. 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 up to $100,000 for those 62+ with gross income at or below $150,000 |
| Estate or inheritance tax | Inheritance tax — spouses, children and grandchildren exempt; the estate tax was repealed in 2018 |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 | 2.23% of home value |
New Jersey’s $100,000 retirement exclusion 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 — 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 On a $500,000 balance withdrawn at $2,500 a month, federal tax alone brings the money down to about 18.8 years, and New Jersey adds none of its own.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 2.23% 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On death: inheritance tax — spouses, children and grandchildren exempt; the estate tax was repealed in 2018.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.
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.
Does New Jersey tax 401(k) and IRA withdrawals?
Covered by the same exclusion. Pensions are treated separately — Retirement income exclusion up to $100,000 for those 62+ with gross income at or below $150,000.
Is New Jersey a good state to retire in for taxes?
Very tax-friendly on income tax. We estimate roughly 0% effective state tax on $40,000 a year of withdrawals for a 65-year-old single filer. Average combined sales tax is about 6.6% and effective property tax about 2.23% 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
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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 2025 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) or a tax professional before acting. The effective-rate estimate is a planning figure, not a filing figure.