---
title: "New Jersey Income Tax: Brackets to 10.75% and How RSUs Are Taxed"
slug: new-jersey-income-tax
publishedAt: 2026-06-24T12:38:48.000Z
updatedAt: 2026-06-25T06:50:34.847Z
author: "Mike Navarro"
authorSlug: mike-navarro
category: "State Tax"
tags: ["New Jersey", "State Tax", "RSU", "ISO", "Equity Compensation", "Tax Brackets"]
excerpt: "New Jersey's Gross Income Tax runs from 1.4% to 10.75% across eight brackets. Here's where equity-comp households actually land, how RSU vesting and ISO gains are taxed, and why NJ's lack of a flat supplemental rate matters for withholding."
canonical: https://myequitytax.com/blog/new-jersey-income-tax
---
New Jersey income tax is a progressive eight-bracket schedule from 1.4% to 10.75%, and it taxes RSU vesting, ISO and NSO gains, and capital gains as ordinary income. A $250K-$650K household lands in the 6.37% bracket, while the 10.75% top rate only applies above $1,000,000 of income.
If you work in tech around New York City but live in New Jersey — or work in NJ outright — your state tax follows a progressive schedule that looks intimidating at the top but lands most equity earners in the middle. This guide covers the New Jersey income tax brackets, where your equity income actually falls, and a withholding quirk that catches RSU holders specifically.
## New Jersey Income Tax Rates and Brackets
New Jersey's Gross Income Tax is a **progressive eight-bracket schedule** that runs from **1.4%** at the bottom to **10.75%** at the very top ([New Jersey Division of Taxation](https://www.state.nj.us/treasury/taxation/individuals.shtml)). Here are the single-filer brackets:
| Taxable Income (Single) | Rate |
|---|---|
| $0 – $20,000 | 1.4% |
| $20,000 – $35,000 | 1.75% |
| $35,000 – $40,000 | 3.5% |
| $40,000 – $75,000 | 5.525% |
| $75,000 – $500,000 | 6.37% |
| $500,000 – $1,000,000 | 8.97% |
| Over $1,000,000 | 10.75% |
As the Division of Taxation frames it:
> "New Jersey has a graduated Income Tax rate, which means it imposes a higher tax rate the higher the income."
>
> — [New Jersey Division of Taxation](https://www.state.nj.us/treasury/taxation/individuals.shtml)
The detail that matters most for equity earners: the broad **6.37%** bracket spans **$75,000 to $500,000** of taxable income, so a typical $250K–$650K tech household sits mostly in the 6.37% band. (Married-filing-jointly brackets are wider at the low end but converge to the same 6.37%, 8.97%, and 10.75% rates at the $500,000 and $1,000,000 thresholds, so the high-end planning is similar regardless of filing status.) The marginal rate steps up to **8.97%** above **$500,000** and to the top **10.75%** only above **$1,000,000** ([NJ tax rate schedules](https://www.nj.gov/treasury/taxation/pdf/current/njtaxratesch.pdf)). New Jersey also has **no standard deduction**; it allows a modest **$1,000 personal exemption per person** that doesn't phase out at high incomes. For how NJ compares with its neighbors, see our [state income tax guide](/blog/state-income-tax-guide).
## How New Jersey Taxes RSUs
New Jersey taxes RSU vesting as **ordinary income** at your marginal bracket rate, on the full fair market value at vest — the same amount included in your federal wages ([IRS Publication 525](https://www.irs.gov/publications/p525)). For most equity earners, that means the **6.37%** rate applies to the bulk of a vest, stepping up to 8.97% on any income above $500,000.
The chart below shows the federal rate that stacks with the New Jersey piece as income rises.
The takeaway: a typical large vest in New Jersey is mostly taxed at 6.37% at the state level — a **$150,000** vest landing entirely in that bracket carries roughly **$9,555** of NJ tax — while the federal rate is where the steeper escalation happens. Only when a vest pushes total income past $500,000 or $1,000,000 do the higher NJ marginal rates apply. For the vest-by-vest mechanics, see our [New Jersey RSU vesting tax breakdown](/blog/nj-rsu-vesting-tax) and the general guide to [how RSUs are taxed](/blog/how-are-rsus-taxed).
Here's how a vest taxed at the 6.37% marginal rate scales, assuming it stays within that bracket:
| RSU vest value (within 6.37% bracket) | New Jersey tax at 6.37% |
|---|---|
| $50,000 | $3,185 |
| $100,000 | $6,370 |
| $150,000 | $9,555 |
| $300,000 | $19,110 |
Because New Jersey is progressive, the picture changes once a vest spans a bracket boundary. Suppose your salary already puts you at $450,000 of taxable income and a $200,000 vest takes you to $650,000. The slice from $450,000 to $500,000 is taxed at 6.37%, and the slice from $500,000 to $650,000 jumps to **8.97%** — so a single vest can straddle two rates. This bracket-straddling is exactly why a multi-year view helps: spreading a large vest or sale can keep more of it in the 6.37% band rather than the 8.97% one.
## New Jersey Withholding on Equity (No Flat Supplemental Rate)
Here's a New Jersey quirk that catches RSU holders: the state publishes **no flat supplemental withholding rate** the way the federal government (22%) or California (10.23%) do. Instead, employers withhold on RSU vesting and other supplemental wages using the **NJ-WT wage-bracket or percentage-method tables**, or the state's supplemental withholding tables — so the amount withheld on a vest depends on your filing status and pay-period wages, not a single posted rate.
The practical consequence is that New Jersey withholding on a vest can **diverge from what you actually owe**, in either direction, because the tables are an approximation of your progressive liability. This is a softer version of the federal [22% withholding gap](/blog/rsu-tax-withholding): you can't assume the NJ amount withheld matches your 6.37% (or 8.97%) marginal rate. The fix is the same — estimate your real NJ liability on each vest and, if withholding falls short, cover it with estimated payments rather than discovering the gap at filing.
There's an added wrinkle for the many New Jersey residents who work in New York. If you commute to a New York employer, New York generally taxes the wages (and the equity earned for that work) as New York-source income, and New Jersey then taxes you as a resident on the same income — with a **credit for taxes paid to New York** to prevent true double taxation. Because New York's rates are high, that credit often absorbs most or all of your New Jersey liability on the wage income, but the interaction makes your return more complex and the withholding even harder to eyeball. If you're in that cross-border situation, our guide to [how New York taxes equity income](/blog/new-york-income-tax) is worth reading alongside this one.
## How New Jersey Income Tax Treats ISOs and Capital Gains
New Jersey conforms to the federal treatment of incentive stock options, so a qualifying ISO exercise creates **no New Jersey ordinary income** at exercise. And like Illinois and Massachusetts, **New Jersey has no separate state alternative minimum tax** — an ISO exercise-and-hold produces only a federal AMT preference, never a state one. That makes the ISO exercise decision for an NJ resident a federal optimization; the state's progressive rate applies only later, when you sell and recognize a gain, or to the ordinary income from an NSO or a disqualifying disposition.
On capital gains, New Jersey taxes them as **ordinary income** at your bracket rate — there is no preferential long-term capital-gains rate at the state level ([NJ Division of Taxation](https://www.state.nj.us/treasury/taxation/individuals.shtml)). So a long-term gain that enjoys the 0/15/20% federal rate still faces your full NJ marginal rate on top, and holding past a year buys you a lower federal rate but no state discount.
One more New Jersey-specific point for startup employees: New Jersey now **conforms to the federal Qualified Small Business Stock (QSBS) exclusion** under IRC §1202 for **tax years beginning on or after January 1, 2026** (New Jersey P.L. 2025, c.67). What matters is the year you *sell*, not when the stock was issued — a §1202-qualifying gain you realize in 2026 or later is excluded from New Jersey gross income to the same extent it's excluded federally, even on shares issued before 2026. (Gains realized in 2025 or earlier got no New Jersey exclusion — the state taxed them at ordinary rates.) This conformity is brand-new, so confirm the current-year treatment with a New Jersey preparer ([NJ Division of Taxation](https://www.state.nj.us/treasury/taxation/individuals.shtml)).
The chart places New Jersey among the major states. Its top **10.75%** rate is among the highest in the country — close to [California's 13.3%](/blog/california-income-tax) — but it only bites above $1,000,000, so most equity earners feel the gentler 6.37% rate rather than the headline top number. For the federal AMT mechanics that still apply to ISO exercises, see our [alternative minimum tax](/blog/alternative-minimum-tax) guide.
## New Jersey Residency and Relocation
New Jersey taxes residents on all income and nonresidents on New Jersey-source income. If you move into or out of the state mid-year while holding equity, your RSU and option income is generally allocated by where you performed the work during the vesting period — the work-day allocation covered in our guide to [moving states mid-year with equity](/blog/moved-states-mid-year-with-equity). New Jersey's progressive schedule makes the allocation arithmetic more involved than a flat-rate state's, since the sourced slice is taxed at whatever bracket your total income reaches. And if your move involves the New York/New Jersey commuter situation, the resident-credit mechanics described above apply on top of the sourcing rules — a combination worth handing to a preparer who handles multi-state equity.
## Planning Notes for New Jersey Tech Employees
New Jersey planning is a mix of bracket awareness and the withholding nuance:
- **Know your bracket** — most equity income lands at 6.37%, stepping to 8.97% above $500,000 and 10.75% above $1,000,000.
- **Don't trust the vest withholding** — with no flat supplemental rate, confirm the NJ amount withheld against your real marginal rate and top up with [estimated payments](/blog/estimated-taxes-on-rsu-income) if short.
- **Treat ISO timing as federal** — New Jersey adds no state AMT, so the exercise decision is a federal one.
- **Expect no capital-gains break (with one exception)** — NJ taxes ordinary capital gains at your bracket rate, but for tax years beginning on/after Jan 1, 2026 it now **follows the federal §1202 QSBS exclusion** (P.L. 2025, c.67), so a qualifying startup exit can be NJ-tax-free.
- **Coordinate with New York** if you commute — the resident credit usually offsets most NJ tax on cross-border wages, but confirm it rather than assuming.
The recurring New Jersey theme is that the progressive schedule and the table-based withholding mean you can't eyeball your state tax the way you can in a flat-rate state. Most equity income lands at a manageable 6.37%, but the lack of a posted supplemental rate, the bracket steps at $500,000 and $1,000,000, and the New York commuter interaction all reward a deliberate annual estimate over a back-of-the-envelope guess. Run the numbers each year you have a significant vest or sale.
## Frequently Asked Questions
**What is the New Jersey income tax rate?**
New Jersey has a progressive eight-bracket schedule that runs from 1.4% to 10.75%. Most equity-comp households fall in the 6.37% bracket ($75,000–$500,000 single), with the top 10.75% rate applying only above $1,000,000.
**Does New Jersey tax RSUs?**
Yes. RSU vesting is taxed as ordinary income at your marginal bracket rate on the full fair market value at vest — most often the 6.37% bracket, stepping higher only above $500,000 of total income.
**Does New Jersey have a state AMT?**
No. New Jersey has no separate state alternative minimum tax, so an ISO exercise-and-hold creates only a federal AMT preference — there's no extra state layer the way California applies one.
**What is New Jersey's top tax rate?**
10.75%, which applies to taxable income above $1,000,000. Below that, the marginal rate is 8.97% from $500,000 to $1,000,000 and 6.37% from $75,000 to $500,000, so most equity earners never reach the headline top rate.