New Jersey residents are subject to tax on all their income regardless of where it is earned, unless the income is specifically exempt from tax under New Jersey law. You must report your military pay pay (including combat pay) and cost-of-living allowance as taxable income on your resident return. Mustering-out payments, subsistence and housing allowances, and military pension benefits
are exempt. Nonresidents
are taxed only on the income they receive from New Jersey sources. Compensation received by a nonresident for services rendered in New Jersey (other than military pay), income from a business, trade or profession carried on in this State, or income or gain generated from a property located in New Jersey is taxable. For nonresidents, New Jersey income tax liability is based on the percentage of their income that comes from New Jersey sources. A nonresident's tax is computed on income from all sources (as if he or she were a New Jersey resident) and then prorated according to the ratio that New Jersey income bears to income from all sources (both inside and outside New Jersey). However, in accordance with federal law, nonresident servicemembers are not required to include their military pay in either their "income from all sources" or "income from New Jersey sources" when calculating their New Jersey income tax liability on Form NJ-1040NR. See Notice for NJ Nonresident Servicepersons Filing Form NJ-1040NR
In general, taxpayers must use the same filing status for New Jersey income tax purposes as for Federal income tax purposes, unless they are a civil union couple. A married couple who files a joint Federal income tax return must file a joint New Jersey income tax return. However, an exception exists where one spouse/civil union partner is a New Jersey resident and the other is a nonresident for the entire year. In this case, the resident may file a separate return unless both agree to file jointly as residents. If a joint resident return is filed, their joint income will be taxed as if both were residents.
If you are a resident of New Jersey, you (and your spouse/civil union partner if he or she is also a resident) must file Form NJ-1040 if your income for the entire taxable year from all sources, including your military pay, is more than $20,000 ($10,000 if filing status is single or married/CU partner, filing separate return). If you are a nonresident you (and your spouse/civil union partner if he or she is also a nonresident) are required to file Form NJ-1040NR if you have earned income from New Jersey
sources other than your military pay and your income for the entire taxable year from all sources, not including your military pay, is more than $20,000 ($10,000 if filing status is single or married/CU partner, filing separate return). NOTE:
Under the Military Spouses Residency Relief Act, a nonresident civilian spouse/civil union partner of a servicemember may be exempt from New Jersey income tax on income (wages) earned from services performed in this State if he or she meets certain requirements. See information on filing requirements for spouses/civil union partners of military personnel.
There are no part-year tax returns. Part-year residents must use Form NJ-1040, and part-year nonresidents must use Form NJ-1040NR and indicate the portion of the year covered by each return. See the income tax return instructions for Form NJ-1040
and Form NJ-1040NR
, and Tax Topic Bulletin GIT-6, Part-Year Residents
, for information on how to complete a part-year return.
New Jersey income tax will be withheld from military pay of New Jersey residents. If you have changed your home of record from New Jersey to another state, or you satisfy the three conditions for nonresident status
, your military pay is not subject to New Jersey income tax.
If you meet the three conditions for nonresident status, file Form DD-2058-1, State Income Tax Exemption Test Certificate, with your payroll or finance officer to stop New Jersey income tax from being withheld from your military pay. Form DD-2058-1 is a U.S. Government form which is used as a basis for not withholding New Jersey income tax from military pay. Do not file this
certificate with the New Jersey Division of Taxation.
Native American servicemen and women use Form DD-2058-2 to claim exemption from state income tax withholding on their service pay. This form requires the individual to provide the name of the tribe to which he or she belongs as well as the name of the reservation or location in Indian Country claimed as the individual's primary residence.
If New Jersey income tax was withheld from your military pay in error, you must file a nonresident return (Form NJ-1040NR
) to obtain a refund of the tax withheld. The income section of the New Jersey nonresident return has two columns - Column A, income from everywhere, and Column B, income from New Jersey sources. If you had no income from New Jersey sources other than your military pay, complete your nonresident return as follows:
Enter in Column A the amount of your gross income from everywhere (excluding your military pay).
Enter zeros on the wages line and on the gross income line in Column B for the amount of income from New Jersey sources.
Enter the amount of New Jersey income tax withheld on the appropriate line and complete the "overpayment" and "refund" lines.
- Attach a statement explaining how you satisfied the conditions for nonresident status.
For more information on military personnel, see Tax Topic Bulletin GIT-7, Military Personnel. For more information on filing status and New Jersey income tax, see Tax Topic Bulletin GIT-4, Filing Status.