New Jersey does not tax Social Security benefits

New Jersey is one of the states that does not impose a state income tax on Social Security retirement, survivor, or disability benefits. If you live in New Jersey and receive Social Security payments, you will not owe state income tax on those payments to the state of New Jersey.

However, you may still owe federal income tax on your Social Security benefits depending on your total income for the year. 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 portion of your benefits is taxable at the federal level.

Key Takeaways

  • New Jersey does not tax Social Security benefits at the state level, regardless of how much you receive or your other income.
  • The federal government may tax your Social Security benefits if your combined income exceeds certain thresholds, which vary depending on your filing status.
  • Combined income is calculated as your adjusted gross income plus nontaxable interest plus half of your Social Security benefits.
  • You can request federal tax withholding from your Social Security payments if you expect to owe federal income tax.

How the federal government determines if your benefits are taxable

The IRS uses a two-tier system to decide whether your Social Security is subject to federal income tax. The thresholds depend on your filing status — whether you file as single, married filing jointly, married filing separately, or head of household.

For a single filer in 2024, if 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, you may owe tax on up to 85 percent of your benefits. For married couples filing jointly, the first threshold is $32,000 and the second is $44,000. These thresholds do not change year to year, so they remain the same unless Congress changes the law.

The actual amount of tax you owe depends on how much of your benefits fall into the taxable range. The IRS has a worksheet in Publication 915 that walks you through the calculation, though many people find it easier to use tax software or work with a tax preparer.

What counts toward your combined income

Combined income includes more than just your salary or wages. It includes your adjusted gross income (which covers wages, pensions, interest, dividends, and capital gains), plus any nontaxable interest (such as interest from municipal bonds), plus half of your Social Security benefits for the year.

This means that even if you have no wages, other sources of income — like a pension, retirement account withdrawals, rental income, or investment income — will push you toward the threshold where your benefits become taxable. If you are still working while receiving Social Security, your wages count toward combined income.

How to handle federal withholding on your Social Security

If you expect to owe federal income tax on your benefits, you can ask the Social Security Administration to withhold federal tax from your monthly payment. You do this by completing Form W-4V (Voluntary Withholding Request) and sending it to your local Social Security office or mailing it to the address on the form.

You can choose to have 7, 10, 12, or 22 percent of your benefit withheld each month. If you are unsure which percentage to choose, the IRS Withholding Calculator on the IRS website can help you estimate. You can change your withholding amount at any time by submitting a new Form W-4V.

Alternatively, you can pay estimated federal taxes directly to the IRS using Form 1040-ES if you prefer not to have withholding taken from your benefits.

State tax considerations if you move or have income from other states

If you move out of New Jersey, you will need to check the tax laws of your new state. Some states, like Pennsylvania and Illinois, also do not tax Social Security benefits. Others tax them the same way the federal government does, and a few tax them more heavily. Your new state's tax department website will have information about how it treats Social Security income.

If you have income from another state — such as a pension from a job you worked in a different state, or rental property income — that state may tax you on that income even if you live in New Jersey. New Jersey allows you to claim a credit for taxes paid to other states to avoid double taxation, but you will need to file a return in both states.

Filing your federal tax return with Social Security income

Even if you do not owe federal tax on your Social Security benefits, you may still need to file a federal return. The IRS requires you to file if your gross income (including half of your Social Security benefits) exceeds the standard deduction for your age and filing status.

For 2024, the standard deduction is higher if you are age 65 or older. A single person age 65 or older has a standard deduction of $20,550, while a married couple filing jointly where at least one spouse is 65 or older has a standard deduction of $26,550. If your combined income is below these amounts, you generally do not have to file, though you may want to file anyway if you had federal tax withheld and are due a refund.

You will report your Social Security benefits on Form 1040 using the amounts shown on your Social Security Statement (Form SSA-1099), which you receive each January.

What to do if you receive a notice about your benefits

If the IRS sends you a notice about your Social Security income, read it carefully to understand what they are asking for. Common notices include requests for additional information about your income or notification that you owe additional tax. Do not ignore a notice — respond within the important date shown on the letter.

If you disagree with the notice or do not understand it, you can contact the IRS at the phone number on the letter, or you can work with a tax professional or a volunteer tax preparer. The IRS Volunteer Income Tax information (VITA) program offers free tax help to people with low to moderate income, and many VITA sites can help you understand notices as well.

Frequently Asked Questions

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

No. New Jersey does not tax Social Security benefits at the state level. You will not owe New Jersey income tax on your Social Security payments, no matter how much you receive or what your other income is.

Can I reduce the amount of federal tax owed on my benefits?

You cannot reduce the amount of your benefits that is subject to federal tax, but you can manage your other income. If you have control over when you take withdrawals from retirement accounts or when you realize capital gains, timing those withdrawals strategically may lower your combined income and reduce the portion of your benefits that is taxable.

What if I did not have enough tax withheld during the year?

You can adjust your withholding for the next year by submitting a new Form W-4V. If you owe tax for the current year, you can pay it when you file your return, or you can make estimated tax payments to the IRS using Form 1040-ES to avoid penalties.

Do I need to file a federal return if I only have Social Security income?

It depends on how much you receive and your age. If your combined income (including half your benefits) is below the standard deduction for your filing status and age, you generally do not have to file. However, if you had federal tax withheld, filing a return may result in a refund.

What happens if I move to another state?

You will need to follow the tax rules of your new state. Some states do not tax Social Security, while others do. Check your new state's tax department website or contact them directly to learn how your benefits will be taxed.