NJ Income Tax – Exempt (Nontaxable) Income
Certain items of income are not subject to New Jersey income tax and should not be included when determining whether you must file a New Jersey return. Below is a partial list of such items.
- Unemployment compensation
- Federal Social Security benefits
- Federal Railroad Retirement benefits (both Tier 1 and Tier 2)
- United States military pensions and survivor's benefit payments
- Workers' compensation
- Permanent and total disability benefits, including VA benefits
- Temporary disability benefits (including family leave insurance benefits) received from the State of New Jersey or as third-party sick pay
- Gifts and inheritances
- Homestead benefits, FAIR rebates, and NJ SAVER rebates
- Property tax reimbursement (senior freeze) payments
- Income tax refunds (New Jersey, Federal, and other jurisdictions)
- New Jersey Lottery winnings from prizes in the amount of $10,000 or less
- Child support payments
- New Jersey earned income tax credit payments
- Welfare payments
- Assistance from a charitable organization whether in the form of cash or property
- Certain distributions from "New Jersey Qualified Investment Funds"
- Also, interest from obligations of the State of New Jersey or any of its political subdivisions is not taxable, nor is interest from direct Federal obligations, such as US Savings Bonds and US Treasury Bills, Bonds, and Notes. However, if you are required to file a New Jersey tax return, you must report the total amount of nontaxable interest on the "Tax exempt interest" Line of your return
- Life insurance proceeds received because of a person’s death
- Employee’s death benefits
For more information on exempt (nontaxable) income, see the section on Income in the tax return instruction booklet, Form NJ-1040.
More information about exempt obligations is available in Tax Topic Bulletin GIT-5, Exempt Obligations.