Central Jersey — the counties of Somerset, Union, Hunterdon, and Mercer — sits at the crossroads of two metropolitan areas and contains some of New Jersey’s most affluent communities alongside working-class cities like Plainfield, Elizabeth, and Trenton. This geographic and economic diversity creates a wide range of tax deduction situations. Here’s what residents need to know for 2025.
Somerset County: High Incomes, High Property Taxes, and the SALT Crunch
Somerset County communities like Bernards Township (Basking Ridge), Bridgewater, and Far Hills consistently rank among New Jersey’s wealthiest. Property taxes here are substantial — often $15,000–$25,000 per year for larger homes — which puts virtually every homeowner against the $10,000 federal SALT cap.
For high-income Somerset County residents, the combination of the SALT cap limiting property tax deductions and the phase-out of the mortgage interest deduction above $750,000 means the itemized deduction path is far less valuable than it was pre-2018. Many Somerset County households are better off taking the standard deduction unless they have significant charitable contributions or other deductible expenses on top of their capped property taxes and mortgage interest.
Union County: Elizabeth, Plainfield, and Westfield
Union County’s economic diversity is striking — affluent suburbs like Westfield, Summit, and Millburn sit alongside Elizabeth, one of New Jersey’s largest and most economically challenged cities. Tax situations vary dramatically:
- Elizabeth and Plainfield: Lower home values mean property taxes often fall under or near the SALT cap combined with state income taxes. Homeowners here may still benefit meaningfully from itemizing. The NJ ANCHOR benefit ($1,500 for qualifying homeowners) is particularly valuable for residents in these communities.
- Westfield and Summit: Very high property taxes ($15,000–$22,000) and high incomes mean the SALT cap eliminates most of the federal property tax deduction. Charitable giving and significant mortgage interest become the primary itemized deductions that can push above the standard deduction threshold.
- Elizabeth port workers and logistics employees: Many Union County workers in the port and logistics sector work as 1099 contractors with vehicle expenses, tools, and equipment that are deductible as business expenses on Schedule C.
Hunterdon County: Rural and Agricultural NJ
Hunterdon County is New Jersey’s most rural county — a mix of farmland, horse properties, historic towns, and commuters willing to drive for lower housing costs. Property taxes are moderate by NJ standards, and many Hunterdon properties participate in farmland assessment programs.
- Farmland assessment: Agricultural properties assessed at farmland value pay dramatically lower property taxes. Qualifying requires at least 5 acres actively devoted to agricultural use. When property is sold or converted, rollback taxes for up to 3 years may apply.
- Home-based agricultural businesses: Many Hunterdon County farmers and equestrian property owners have Schedule F (farm income) or Schedule C business income, with deductible farm expenses including equipment, feed, veterinary costs, and agricultural supplies.
- Long-distance commuters: Residents who commute to NYC or Philadelphia have long drives — tracking business mileage is critical if any driving is for business purposes.
Mercer County: Trenton, Princeton, and Hamilton
Mercer County contains New Jersey’s state capital (Trenton), one of the world’s most recognized university towns (Princeton), and large suburban communities in Hamilton and Lawrence Township. Tax considerations here are as varied as the population:
- Princeton University employees and researchers: Many Princeton employees receive benefits including tuition assistance (first $5,250/year is tax-free), housing allowances (taxable), and research stipends (taxable). Each requires careful reporting. Grad student stipends are generally taxable as ordinary income.
- State government employees in Trenton: Many government workers have New Jersey state pension contributions, which are deductible from NJ taxable income but not federal income (since they’re after-tax for federal purposes). Understanding which contributions reduce which tax matters.
- Hamilton Township: Hamilton is one of NJ’s largest townships with a diverse population and significant homeownership. Property taxes average $7,000–$10,000, meaning some homeowners may be able to fully deduct both property taxes and state income taxes under the SALT cap, particularly at lower income levels.
The Philadelphia Commuter Credit — Mercer and Hunterdon
Many residents of southern Mercer County and Hunterdon commute to Pennsylvania and pay PA income tax on their wages. As with Camden County commuters, New Jersey provides a credit for taxes paid to other jurisdictions on NJ Schedule A. If you work in Philadelphia or Pennsylvania and live in Mercer or Hunterdon County, make sure your tax preparer is applying this credit correctly on your NJ return.