New Jersey’s income tax return works nothing like the federal 1040 — there’s no standard deduction, no federal-style itemizing, and a completely different list of what you can claim. This cheat sheet covers every deduction, exemption, and credit allowed on the 2025 NJ-1040, with links to our detailed guides on each.
First, the Big Surprise: NJ Has No Standard Deduction
If you’re searching for the “NJ standard deduction,” it doesn’t exist. New Jersey instead gives personal exemptions — $1,000 for yourself, $1,000 for a spouse, $1,500 per dependent, an extra $1,000 if you’re 65+, blind, or disabled, and a $6,000 exemption for honorably discharged veterans. Everything else comes from the specific deductions below. Full context in our NJ state income tax guide.
Deductions Allowed on the NJ-1040
- Medical expenses over 2% of gross income — dramatically better than the federal 7.5% floor. See why NJ’s medical deduction is more generous than federal.
- Property taxes — up to $15,000 paid on your principal residence, or the $50 refundable credit. Renters claim 18% of rent as property taxes — details in the NJ renters guide.
- Self-employed health insurance — see the NJ self-employed tax guide.
- Alimony paid — still deductible in NJ even for post-2018 divorces.
- Qualified conservation contributions and Health Enterprise Zone deductions.
Credits on the NJ-1040
- NJ Earned Income Tax Credit — 40% of your federal EITC.
- NJ Child Tax Credit — up to $1,000 per child age 5 or younger (full amount at $30,000 or less of taxable income, phased out entirely above $80,000).
- Child and Dependent Care Credit — a percentage of the federal credit for qualifying incomes.
- Property tax credit — the $50 alternative to the deduction.
Retirement Income: The Pension Exclusion
Taxpayers 62+ (or disabled) with gross income of $100,000 or less can exclude up to $100,000 (married filing jointly) of pension and retirement income. Partial exclusions apply above that — 50% up to $125,000 and 25% up to $150,000; above $150,000 the exclusion disappears entirely. Full rules in our NJ pension and retirement income guide and the senior tax deductions page.
Property Tax Relief Beyond the NJ-1040
Two of NJ’s biggest tax breaks aren’t on the income tax return at all: the ANCHOR benefit (up to $1,750 for eligible homeowners) and the Senior Freeze. Both are covered in our ANCHOR and Senior Freeze guide. County-specific details: Essex, Ocean, Morris, Union, and Passaic.
NJ-1040 FAQ
What deductions are allowed on a NJ tax return?
Medical expenses over 2% of gross income, up to $15,000 of property taxes (or 18% of rent for renters), self-employed health insurance, alimony paid, and qualified conservation contributions — plus personal exemptions. NJ does not allow federal itemized deductions like mortgage interest or charitable donations.
Does NJ tax Social Security?
No. Social Security benefits are not taxable on the NJ-1040, and neither is interest on federal obligations.
Can I deduct my federal taxes or 401(k) contributions on the NJ-1040?
No. Federal taxes are never deductible on the NJ-1040. Note the retirement plan wrinkle: 401(k) contributions are pre-tax for NJ (like federal), but traditional IRA and 403(b) contributions are not deductible on the NJ return — one of the most common NJ filing mistakes.
What’s the NJ inheritance and exit tax situation?
NJ has an inheritance tax (but no estate tax since 2018), and the so-called exit tax is really just estimated withholding when you sell a home and leave the state.
Educational purposes only — not tax advice. Source: NJ Division of Taxation. Consult a CPA for your specific situation.
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