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How to Calculate New Jersey State Income Tax

Determine Your New Jersey State Income Tax Level

1.

Get your W-2 statement from your employer, or obtain whatever equivalent applies to you if you're self-employed. W-2s are automatically forwarded to employees when tax season approaches, detailing down to the penny how much money you earned from your employment during the year.

2.

Add taxable income from other sources to your employment earnings. For example, money you earn on investments is taxable--though only if you realize the earnings in cash by selling off your investment to realize profit, in many cases. Cash awards, prizes and any money you inherit must also be claimed as part of your annual income.

3.

Calculate your taxable income by subtracting all tax deductions from the total income you earned during the year. All individuals qualify for a basic deduction, but you might be able to claim others, especially if you're a business owner, self-employed or the supporter of dependents.

4.

Learn the New Jersey schedule of tax rates. Taxable income of approximately $20,000 or less requires you to pay a 1.4-percent rate. If you made about $20,000 to $35,000, your state tax rate is 1.75 percent, and earnings falling between about $35,000 and $40,000 are taxed at a 3.5-percent rate.

5.

Understand that tax rates increase as your earnings increase. A 5.525-percent rate applies to taxable income between approximately $40,000 and $75,000. If you make about $75,000 to $500,000 in New Jersey, you'll pay 6.37 percent, and if you're lucky enough to be making about $500,000 or more per year, you'll pay an 8.97-percent tax rate.

6.

Multiply your income by the decimal equivalent of your tax bracket's percentage rate to calculate the amount you owe in New Jersey state income tax. For example, if you earned $54,500 to fall in the 5.525-percent bracket, you would multiply 54,500 by 0.0525 to discover that you will owe $2,861.25 in state income tax.

Tips and Warnings

  • Cheating on your taxes can land you in prison. Report your income honestly.


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