Navigating the Garden State's Taxes: 5 Essential Things South Jersey Residents Need to Know About NJ Income Tax

As a resident, or even a non-resident working in the vibrant communities of South Jersey, understanding New Jersey's income tax system is just as crucial as knowing your federal obligations. At KBI Consulting, your trusted South Jersey tax experts, located in Haddonfield, NJ, we're here to demystify state taxes and help you navigate the unique aspects of New Jersey's tax landscape. Here are five fundamental aspects of federal income taxes every U.S. citizen connected to South Jersey should know about their state income taxes:

1. Who Needs to File in New Jersey, and When?

Just like federal taxes, whether you need to file a New Jersey income tax return (Form NJ-1040 for residents or NJ-1040NR for non-residents/part-year residents) depends on your gross income and filing status. For our South Jersey clients, it's vital to understand these thresholds for accurate tax planning.

Key Filing Thresholds (for most common statuses):

• Single or Married/Civil Union Filing Separate: If your gross income from everywhere was at least $10,000.

• Married/Civil Union Filing Jointly, Head of Household, or Qualifying Widow(er): If your gross income from everywhere was at least $20,000.

Important Note for South Jersey Taxpayers: Even if your income is below these thresholds, you might still want to file if you had New Jersey income tax withheld from your wages or if you're eligible for refundable credits, such as the New Jersey Earned Income Tax Credit (NJEITC), to claim a refund. Don't leave money on the table!

Annual Deadline: For most individuals and small businesses in South Jersey, the New Jersey income tax return is due by April 15th, aligning with the federal deadline. If April 15th falls on a weekend or holiday, the deadline shifts to the next business day. New Jersey also offers extensions to file, but remember, an extension only provides more time to submit your return, not to pay any taxes you owe. Our tax accountants can assist with filing extensions if needed.

2. New Jersey's Progressive Tax System and Brackets

New Jersey also employs a progressive income tax system, meaning that higher earners pay a larger percentage of their income in taxes. However, it's crucial to remember that this applies to portions of your income, not your entire income at the highest rate.

New Jersey features a number of tax brackets, with rates ranging from 1.4% up to 10.75% (for income exceeding $1 million). This progressive structure means that different segments of your taxable income are taxed at varying rates. Your "effective tax rate" will be a blended average of these rates, generally lower than your highest marginal rate. Our team helps South Jersey individuals and small businesses understand how these brackets impact their specific tax liability.

3. Understanding NJ Deductions and Credits: More Than Just Federal!

This is where smart tax planning can make a significant difference for South Jersey families and businesses! While many federal deductions and credits don't directly transfer to your New Jersey return, the Garden State offers its own set of provisions to reduce your taxable income or tax bill.

• New Jersey Exemptions: Unlike the federal standard deduction (which NJ does not use), New Jersey offers specific exemptions that reduce your taxable income. These include personal exemptions for yourself and your spouse, as well as additional exemptions for dependents, seniors (65+), and those who are blind or disabled. There are also specific exemptions for veterans and college students.

• Key NJ Credits and Deductions Our South Jersey Clients Benefit From:

• Property Tax Deduction/Credit: This is a significant one for homeowners and renters across South Jersey! You can choose to take either a deduction (up to $15,000 for homeowners or 18% of rent paid for renters) to reduce your taxable income, or a refundable $50 Property Tax Credit. Our South Jersey based tax preparers in will meticulously review your situation to help you determine which offers the greater benefit.

• New Jersey Earned Income Tax Credit (NJEITC): This is a refundable credit for low-to-moderate-income individuals and families, calculated as a percentage of the federal EITC.

• Child and Dependent Care Credit: A non-refundable credit for certain child care expenses.

• Medical Expenses Deduction: You may be able to deduct medical expenses exceeding 2% of your income.

• Alimony Paid: Court-ordered alimony payments can be a deduction.

Knowing which deductions and credits apply to your unique situation is vital to minimize your New Jersey tax liability.

4. New Jersey Taxes All Income – And Considers Residency Closely

New Jersey taxes all income of its residents, regardless of where that income was earned. This means your wages, business income, rental income (especially if you own properties in South Jersey!), capital gains, interest, and dividends are generally subject to New Jersey income tax.

Residency Matters: New Jersey has strict rules for determining your residency status (Resident, Part-Year Resident, or Non-Resident). Your residency status dictates how your income is taxed and which forms you'll file. This is particularly important for South Jersey residents who might work in Philadelphia or other nearby states, or for individuals relocating to/from the area.

• Residents: Taxed on all income, wherever earned.

• Non-Residents: Only taxed on income derived from New Jersey sources (e.g., income from a job in NJ, rental property in NJ).

• Part-Year Residents: Taxed on income earned while a resident of NJ, plus any NJ-sourced income earned while a non-resident.

Reciprocal Agreements: New Jersey does have a reciprocal agreement with Pennsylvania. This means if you are a New Jersey resident working in Pennsylvania, your wages are generally exempt from Pennsylvania income tax and are instead taxable to New Jersey. Our South Jersey tax firm specializes in these cross-state tax situations.

5. New Jersey's "Pay-As-You-Go" System and Estimated Taxes

Like the federal government, New Jersey operates on a "pay-as-you-go" system. This means your income tax liability is expected to be paid throughout the year as you earn income.

• Withholding: For most employees in South Jersey, New Jersey income tax is withheld from each paycheck based on your Form NJ-W4.

• Estimated Taxes: If you are self-employed, have significant investment income, pension income not subject to sufficient withholding, or other income not subject to regular withholding, you likely need to make quarterly estimated tax payments to the New Jersey Division of Taxation. You are generally required to pay estimated taxes if you expect to owe more than $400 in New Jersey income tax for the year.

Paying enough tax through withholding or estimated payments is crucial to avoid underpayment penalties. The quarterly estimated tax payment due dates are generally April 15, June 15, September 15, and January 15 of the following year. Our South Jersey accounting firm helps businesses and individuals calculate and make these estimated payments correctly.

Navigating New Jersey's income tax laws can be complex, with specific rules, deductions, and credits unique to the state. Don't leave your tax situation to chance.

At KBI Consulting, your trusted South Jersey tax advisors located in Haddonfield, NJ, our experienced team is well-versed in both federal and New Jersey tax regulations. We specialize in providing comprehensive tax preparation services for individuals and small businesses across South Jersey, helping you ensure compliance while maximizing your tax savings.

Contact us today at (610) 420-4952 or email us at KBI@kbiconsultants.com for personalized guidance and professional tax preparation in South Jersey.