NJ has one of the highest tax burdens. We break it down to show every tax you pay
6-minute read
David M. Zimmer- New Jersey’s property taxes are consistently ranked as the highest in the country, with the average bill climbing to nearly $10,100 in 2024, according to the state Department of Community Affairs.
- New Jersey’s income tax top rate is one of the highest in the country, according to the Tax Foundation.
From the commuter packed into a rush-hour train to the nurse working a long shift and the child in a top-ranked New Jersey public school, state taxes impact daily life beyond just paychecks and tax days.
New Jersey tax dollars support well-ranked schools, solid infrastructure and essential public services, but the rates are nonetheless among the highest in the nation.
The Garden State ranks sixth nationally in total tax burden for 2025, according to WalletHub. The tax load, equivalent to 10.3% of personal income, comprises the nation’s third-highest property tax burden, a high income tax burden, and moderate sales taxes.
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WalletHub breaks down the state’s tax composition as 4.67% of income going to property taxes, 2.87% to income taxes and 2.76% to sales and excise taxes. Only New York, Hawaii, Vermont, Maine and Connecticut rank higher in overall percentage for 2025. Federal taxes and other fees help bring the state's effective tax rate even higher. Here are the main culprits:
New Jersey property taxes
New Jersey’s property taxes are consistently ranked as the highest in the country, with the average bill climbing to nearly $10,100 in 2024, according to the state Department of Community Affairs.
The revenue supports local services such as public schools, municipal operations, police departments and libraries. The Tax Foundation ranked New Jersey 49th out of 50 states (only behind New York) in overall tax competitiveness in recent years, including 2025, with officials citing property taxes as a major factor.
According to the Tax Foundation, the average effective property tax rate in the state was 2.23% in 2023, compared to a national average of 0.9% in SmartAsset’s 2024 property tax study. That means a home assessed at $300,000 would face a property tax bill of nearly $6,700 a year in New Jersey, compared to about $2,700 under the national average.
New Jersey income taxes
The state’s progressive income tax ranges from 1.4% for income under $20,000 to 10.75% for income over $5 million, according to Division of Taxation records.
New Jersey’s top rate is one of the highest in the country, according to the Tax Foundation. Moreover, according to Bankrate’s 2024 state tax comparison, New Jersey does not adjust its tax brackets for inflation, which means residents may face higher effective tax rates over time even if their real income does not increase.
The lack of indexing can result in “bracket creep,” where inflation pushes taxpayers into higher tax brackets despite no increase in purchasing power. Some states, including Texas, Florida and New Hampshire, have no income tax and therefore no taxes on 401(k) withdrawals, according to the Tax Foundation. Some others with a state income tax do not tax 401(k) withdrawals in retirement, including Illinois, Iowa and Pennsylvania. New Jersey allows retirees to exclude some income from state taxes, depending on their earnings. Right now, the cutoff for that exclusion is $150,000 in total income.
New Jersey sales tax
New Jersey’s statewide sales tax is 6.625%, less than a few other states including California (7.25%), Indiana (7%) and Nevada (6.85%) but more than most, including several that have no sales tax: Alaska, Delaware, Montana and New Hampshire, according to the Tax Foundation.
Some areas in designated Urban Enterprise Zones offer a reduced rate of 3.3125%. Most clothing and groceries are exempt, but prepared foods, restaurant meals and many services are fully taxable. The New Jersey Division of Taxation outlines these rules in its Sales Tax Guide, noting that while some exemptions lighten the load, the structure still contributes to overall costs.
New Jersey gas tax
As of Jan. 1, New Jersey drivers pay $0.449 per gallon in gasoline taxes, including both the motor fuels tax and the petroleum products gross receipts tax.
Diesel is taxed at $0.519 per gallon.
These rates are set annually based on a formula tied to revenue goals related to infrastructure improvements on the state’s roadways and bridges. AARP’s 2024 New Jersey state tax guide places the state among the top 10 for highest fuel taxes. The Tax Foundation has it eighth in 2024, far behind California's $0.681 tax but above the median tax of $0.30 per gallon imposed in South Dakota, Nebraska and Iowa.
New Jersey's 'Sin Tax'
Excise taxes in New Jersey add significant cost to a variety of products, most notably in the form of so-called "sin taxes."
According to the state Division of Taxation, the excise tax on beer is $0.12 per gallon, on wine is $0.875 per gallon and on liquor is $5.50 per gallon. These are in addition to the state’s 6.625% sales tax.
Cannabis is taxed at $1.24 per ounce under a separate social equity fee, while cigarettes are taxed at $2.70 per pack. Tobacco products, meanwhile, carry a 30% wholesale tax, and vapor products are taxed at $0.10 per milliliter of liquid nicotine and 10% of the retail price for container e-liquids.
Other New Jersey excise taxes
Excise taxes also infiltrate other everyday transactions. Public water systems pay a tax of $0.00001 per gallon, and utilities face gross receipts and franchise taxes ranging from 0.625% to 7%, depending on use and revenue level.
Wholesalers and retailers pay a litter control fee of 0.03% and 0.0225% of gross receipts, respectively. Even ride-hailing trips are subject to excise tax. There is a $0.50 state surcharge for single riders that falls to $0.25 for shared rides. Petroleum products are subject to a spill compensation tax of 2.3 cents per barrel, while some hazardous substances are taxed at 1.53% of fair market value.
New Jersey inheritance taxes
While New Jersey repealed its estate tax in 2018, it still imposes an inheritance tax ranging from 11% to 16% on amounts of more than $25,000, depending on the relationship of the heir to the deceased.
Spouses, children and grandchildren are exempt, but siblings, nieces, nephews and unrelated beneficiaries may owe significant sums.
This structure remains one of the few of its kind in the country, as only 17 states impose these types of taxes, according to the Tax Foundation. Maryland is the only state that charges both an estate tax and an inheritance tax. The instructions for New Jersey's Inheritance Tax form, Form IT-R, outline the specific rules.
Comparing New Jersey to other states
By percentage of income, New Jersey’s 10.3% total tax burden is lower than New York’s (13.56%) but higher than Pennsylvania’s (8.53%), based on WalletHub’s 2024 comparison. However, New Jersey’s per capita property tax collections are the highest in the nation, a key reason residents consistently rank the state as among the most expensive to live in.
A 2024 report from the Tax Foundation also ranked New Jersey 50th — dead last — in its State Business Tax Climate Index. The state earned low marks for its corporate taxes, property taxes and individual income tax structure.
Federal Social Security and Medicare taxes
New Jersey residents, like all U.S. wage earners, pay at least 7.65% of their income in federal payroll taxes to fund Social Security and Medicare. The rates are 6.2% for Social Security on wages up to $176,100 and 1.45% for Medicare with no income cap as of 2025, according to federal records.
High earners pay an additional 0.9% Medicare surtax on wages above $200,000 for individuals and $250,000 for joint filers, as outlined by the IRS.
These payroll taxes are matched by employers, meaning self-employed individuals are responsible for the full amount. However, they can deduct the employer-equivalent portion when calculating their federal income tax liability.
Federal Income Tax
Federal income tax is applied in tiers known as tax brackets, with higher portions of income taxed at higher rates. For 2024, a single filer pays 10% on the first $11,600 of taxable income, 12% on income up to $47,150, and 22% on income up to $100,525, according to IRS tables. Only the income that falls within each bracket is taxed at that rate. The same system applies to joint filers, but with wider income ranges.
Breaking down the tax burden on New Jersey earners
This is an example of a New Jersey dual-income household's tax burden, which includes all New Jersey and federal taxes.
EXAMPLE: Annual Gross Income: $150,000 (Taxes paid based on two earners making $75,000 each.)
- Federal Income Tax: — $13,150: Based on IRS 2024 tax tables, married filing jointly, with two child tax credits. Source: IRS
- Social Security and Medicare (FICA) — $11,475, which is $5,738 in payroll taxes each: Social Security: $9,300 (6.2% of $150,000, capped at $168,600 in 2024), Medicare: $2,175 (1.45% of $150,000). Source: Social Security Administration/IRS
- New Jersey State Income Tax: — $5,510 — blended effective rate around 3.7% for $150,000 income (married filing jointly). Source: NJ Division of Taxation
- Property Taxes — $10,095 — based on New Jersey’s average property tax bill in 2024: $10,095. Source: NJ Department of Community Affairs
- Sales Tax: — $2,080 — based on $31,400 of taxable spending at 6.625% (average consumer goods, electronics, etc. – excludes food/rent/medications). Source: NJ Division of Taxation
- Gas Tax: —$431 — NJ gas tax is 44.9 cents/gallon. Assume 24,000 miles/year, 25 mpg = 960 gallons. Source: NJ Treasury Department
- Other Fees & Levies: —$600 — such as auto registration, tolls, cell phone surcharge and utility taxes. Source: BLS Consumer Expenditure Survey/NorthJersey.com estimates
- Total Annual Tax Burden: = $43,341
- Effective Tax Rate — 28.9%
…and more New Jersey taxes
There are numerous other taxes that New Jersey residents pay, from real estate sales, purchases and transfers, recycling, public utilities, hotels, short-term rentals and more. A full list of state taxes is available on the New Jersey treasury website at nj.gov/treasury/taxation/adminby.shtml.