Military veterans who were honorably discharged or released under honorable circumstances are eligible for a $6,000 exemption on New Jersey Income Tax returns.
Military pay is taxable for New Jersey residents, including combat zone pay received in 2020 and prior.
For Tax Year 2021 and forward, combat pay is not taxable in New Jersey (P.L. 2020, c. 93). The law excludes military pay for service in a combat zone, or for hospitalization as the result of injury while serving in a combat zone, from income under the New Jersey Gross Income Tax Act. If your combat pay is exempt from federal income tax, it is exempt for New Jersey and should not be reported on a New Jersey Income Tax return (Form NJ-1040, Form NJ-1040NR).
Mustering-out payments, subsistence and housing allowances, and U.S. military pension and survivor's benefit payments are not taxable.
This law is not retroactive. For Tax Year 2020 and prior, combat pay is still taxable income.
Check the Status of Your New Jersey Income Tax Veteran Exemption Claim
Resident Service Members: If you are a resident service member, stationed out-of-State, and buy a car outside of New Jersey, but wish to title the vehicle in New Jersey, you may defer payment of Sales Tax until the vehicle is brought to New Jersey. You must first complete a Military Sales Tax Deferment Application (Form MD-1), have it notarized, and mail it to the address on the application. Once we receive your application and approve it, we will send you a Letter of Deferment. You must present this letter at the time of titling. If the Letter of Deferment is not received, Sales Tax must be paid. If you already have a deferment for a motor vehicle, you must pay the Sales Tax on that vehicle, or provide proof that you no longer own it, before we can issue a deferment for this request. Only one vehicle can be deferred at a time.
Disabled Veterans: If you are a disabled veteran and received funds from the U.S. Department of Veterans Affairs (VA) or the New Jersey Department of Military and Veterans Affairs (NJDVA) to purchase a car, the amount received for the vehicle is not subject to Sales Tax. The exemption is only applicable if the funds for the vehicle purchase came directly from the VA/NJDVA or the VA/NJDVA provides a loan. The funds received must equal the total purchase price of the vehicle for it to be totally exempt. The payment for the vehicle can be a combination of personal funds and funds received from the VA/NJDVA. Any amount that you pay out of pocket, towards the purchase of the vehicle, is subject to Sales Tax.