For retirees in New Jersey, there’s good news: Social Security benefits will remain exempt from state income tax in 2025. While some states impose taxes on Social Security payments, New Jersey continues to provide full exemptions for its residents.
However, while state taxes won’t apply, retirees should still be aware that federal taxes may still impact their benefits, depending on total income.
This article breaks down what this means for retirees, how federal taxation applies, and why lawmakers are pushing for broader tax reform on Social Security.
New Jersey’s Policy on Social Security Taxation
New Jersey has long maintained a tax-friendly approach for retirees, and Social Security benefits are fully exempt from state income taxation. The New Jersey Division of Taxation has confirmed that this policy will continue through 2025, providing much-needed relief for seniors living on fixed incomes.
What Does This Mean for Retirees?
If you live in New Jersey, you will not have to pay state taxes on Social Security income, regardless of how much you receive. This makes the Garden State an attractive option for retirees looking to maximize their retirement income.
Other Retirement Tax Exemptions in New Jersey
In addition to exempting Social Security, New Jersey offers other tax breaks for retirees, including:
- Retirement Income Exclusion: Qualified taxpayers over 62 years old can exclude up to $100,000 of retirement income (such as pensions, IRAs, and annuities) from state income tax.
- Property Tax Relief: Various programs, including the Senior Freeze Program and Homestead Benefit Program, help retirees manage property taxes.
Federal Taxation of Social Security Benefits
Although New Jersey does not tax Social Security benefits, federal income tax rules still apply. The amount of Social Security benefits subject to federal tax depends on your combined income:
Who Pays Federal Tax on Social Security?
- Single Filers:
- Income between $25,000 and $34,000 – Up to 50% of benefits may be taxable.
- Income above $34,000 – Up to 85% of benefits may be taxable.
- Married Filing Jointly:
- Income between $32,000 and $44,000 – Up to 50% of benefits may be taxable.
- Income above $44,000 – Up to 85% of benefits may be taxable.
Legislative Push to End Federal Taxation of Social Security
While New Jersey continues to offer state tax relief, lawmakers are pushing for broader federal tax reforms.
In January 2025, State Senator Owen Henry introduced Senate Resolution No. 122, urging the federal government to eliminate taxes on Social Security benefits altogether.
Key arguments for eliminating federal taxation:
- Before 1984, Social Security benefits were completely tax-free.
- The income thresholds for taxation have not been adjusted for inflation since the 1980s, meaning more retirees are paying taxes on their benefits.
- Many retirees rely solely on Social Security, and federal taxes reduce their financial security.
How New Jersey Compares to Other States
New Jersey is among the majority of states that do not tax Social Security benefits. However, 12 states still impose some form of taxation on benefits:
States That Tax Social Security (as of 2025)
- Colorado
- Connecticut
- Kansas
- Minnesota
- Missouri
- Montana
- Nebraska
- New Mexico
- Rhode Island
- Utah
- Vermont
- West Virginia
Maximizing Your Retirement Income in New Jersey
How to Reduce Federal Taxes on Social Security
- Withdraw Strategically: Drawing income from Roth IRAs, municipal bonds, or other non-taxable sources can help keep your taxable income lower.
- Delay Social Security: Waiting until full retirement age (67) or age 70 increases your monthly benefit, helping offset any tax burden.
- Use Tax Credits: Low-income retirees may qualify for the Credit for the Elderly or Disabled to lower their tax bill.
Conclusion: A Win for New Jersey Retirees
New Jersey remains a tax-friendly state for retirees, with no state taxes on Social Security benefits and additional exemptions for other retirement income. While federal taxes still apply, proposed legislation could change that in the future.
For now, seniors in New Jersey can take comfort knowing their Social Security income will remain untouched by state taxes in 2025. To stay informed, visit the New Jersey Division of Taxation or speak with a financial advisor to optimize your retirement income.
This article has been carefully fact-checked by our editorial team to ensure accuracy and eliminate any misleading information. We are committed to maintaining the highest standards of integrity in our content.
A senior at Yale-NUS College with interests in developmental and labour economics, as well as creative non-fiction and poetry. Currently, I’m studying as an Economics major and an Arts and Humanities minor (focusing on Creative Writing) with heavy involvement in the Singaporean journalism scene and involved in research on economic history and educational policy. I’m working as an author for The Octant, Yale-NUS’ student publication, as a writer for Wingspan, Yale-NUS’ alumni magazine, and as a tutor for the NUS Libraries Writer’s Centre. | Linkedin