New Jersey · what’s new
What’s new in New Jersey for 2026: a bigger child credit, a smaller Stay NJ, and nothing from Washington
What changed on the New Jersey return between 2025 and 2026, what the 2025 federal tax law did and did not do to it, what the Legislature passed in the June 2026 budget, and what the property tax relief programs will pay. For anyone who filed a New Jersey return last year and wants to know whether the same rules still hold.
By Charles Trautman, EA, editor
Need to Know Tax · written from New Jersey Division of Taxation (Department of the Treasury) sources, November 3, 2026; updated November 12, 2026 after the election · not yet reviewed by a New Jersey practitioner
The bottom line
- Rates and brackets are unchanged for 2026, 1.4% to 10.75%.
- The New Jersey Child Tax Credit is 25% larger for 2026 through 2028: up to $1,250 for a child 5 or younger at taxable income of $30,000 or less.
- Gain on qualified small business stock is excluded beginning in 2026, to the extent the federal return excludes it.
- The business-loss offset on Schedule NJ-BUS-2 is cut to 25% above $500,000 of gross income and to zero at $1,000,000.
- The federal tips, overtime and senior deductions do not affect Form NJ-1040.
- Stay NJ is limited to household incomes of $200,000 or less, with benefits from $6,500 down to $4,000.
- Form NJ-1040 is due Thursday, April 15, 2027.
- No tax question was on the November 3 ballot.
The 2026 NJ-1040 is last year’s return with three changes a household can feel. The New Jersey Child Tax Credit is 25% larger for 2026, 2027 and 2028: $1,250 instead of $1,000 for a child 5 or younger at taxable income of $30,000 or less. Stay NJ, the senior property tax program, was cut before it paid its first full benefit: the income limit fell from $500,000 to $200,000 and the $6,500 maximum now applies only at $100,000 of income or less. And the federal deductions everyone heard about in 2025, for tips, overtime, seniors, car loans and state and local taxes, do not touch the New Jersey return at all. The Division of Taxation said so on December 1, 2025, and the reason is structural: New Jersey never starts from the federal return. The rates, brackets and $1,000 exemptions are the same as 2025, as they have been since 2020.
The rest is at the edges: gain on qualified small business stock leaves New Jersey income starting in 2026, and the Alternative Business Calculation Adjustment is cut for gross income over $500,000. There was no tax question on the November 3, 2026 ballot. The governor and Legislature were elected in 2025, and the budget they signed June 30, 2026 is the law the 2026 return will be filed under.
The federal law of 2025 and the New Jersey return
Congress enacted a long list of individual deductions in July 2025: tips up to $25,000, overtime up to $12,500 ($25,000 joint), $6,000 for people 65 and older, car loan interest, a higher SALT cap, a charitable deduction for non-itemizers. The question every New Jersey filer asked was whether the state would follow. The answer is no, and it was never really a question.
Form NJ-1040 does not begin with federal adjusted gross income or federal taxable income. It adds up New Jersey’s own categories of income, each figured under New Jersey rules, and allows only the deductions written into the New Jersey statute. A federal deduction reaches the return only if the Legislature writes it in, and none of the 2025 deductions were. The Division’s December 1, 2025 notice says the tips, overtime and senior deductions “do not affect” Forms NJ-1040, NJ-1040NR and NJ-1041 for tax years 2025 through 2028. Its October 2025 tax update presentation adds that the SALT cap has no New Jersey effect because there is no state and local tax deduction to cap, the car loan interest and charitable changes are not recognized, and the federal child tax credit changes do not alter New Jersey’s own credit.
| Federal change | New Jersey treatment | What it means on the NJ-1040 |
|---|---|---|
| Tips deduction, up to $25,000 | Not followed | Tips are wages on Line 15, taxed in full |
| Overtime deduction, up to $12,500 / $25,000 | Not followed | Overtime is wages on Line 15, taxed in full |
| $6,000 senior deduction, 65 and older | Not followed | New Jersey’s own $1,000 exemption at 65 continues, and so does the Retirement Income Exclusion |
| SALT cap raised | Not applicable | No state or local tax deduction exists in New Jersey; the property tax deduction up to $15,000 is a separate New Jersey break |
| Car loan interest deduction | Not followed | No personal interest deduction of any kind |
| Charitable deduction for non-itemizers; 0.5% floor | Not followed | New Jersey has never allowed a charitable deduction |
| 100% bonus depreciation; new production-property expensing | Not followed, since 2004 | Business, rental and farm filers adjust on Form GIT-DEP and Schedule NJ-BUS-1; New Jersey allows a $25,000 section 179 limit and no 50% or 100% special allowance |
| Federal child tax credit made permanent and raised | Separate credit | New Jersey’s credit is its own, for children 5 or younger, and was raised by the state (below) |
| Larger federal child and dependent care credit | Follows by formula | The New Jersey credit is a percentage of the federal credit, so it rises with it |
Sources: the Division’s December 1, 2025 notice on the federal act and its October 22, 2025 tax update presentation. The bonus depreciation row comes from the GIT-DEP worksheet revised October 2025, which still allows only the old 30% special allowance.
One row cuts the other way. New Jersey’s Child and Dependent Care Credit is a percentage of the federal credit (50% at taxable income of $30,000 or less, down to 10% at $120,001 to $150,000), so the larger 2026 federal credit raises the New Jersey one with no state action. Tipped workers get no such help: the state tax on $14,000 of tips for a single filer in the 5.525% bracket is about $774, the same as in 2025.
The June 2026 budget
The fiscal 2027 budget bills were signed June 30, 2026. Three of them reach individual filers.
Child Tax Credit, up 25% for three years. P.L.2026, c.26 (S4531 / A5329) raises each tier for tax years 2026, 2027 and 2028 only. The credit is still for a dependent child 5 or younger on December 31, still limited to New Jersey taxable income of $80,000 or less, refundable, unavailable on a married-filing-separately return, and open to ITIN filers. The Division’s Child Tax Credit page still showed the 2025 amounts when this was written; the 2026 amounts come from the bill text and the June 30 signing.
| New Jersey taxable income (Line 42) | 2025 return | 2026, 2027, 2028 returns | 2029 and later |
|---|---|---|---|
| $30,000 or less | $1,000 | $1,250 | $1,000 |
| $30,001 to $40,000 | $800 | $1,000 | $800 |
| $40,001 to $50,000 | $600 | $750 | $600 |
| $50,001 to $60,000 | $400 | $500 | $400 |
| $60,001 to $80,000 | $200 | $250 | $200 |
| Over $80,000 | $0 | $0 | $0 |
Part-year residents prorate by the months lived in New Jersey; 15 days or more counts as a month. The tiers are cliffs: one dollar of taxable income over $30,000 drops the credit from $1,250 to $1,000 per child.
Alternative Business Calculation Adjustment, cut at the top. A loss in one category of New Jersey income never offsets another, but a business owner with a loss in one business (a Schedule C, a rental, a partnership) and a profit in another may deduct 50% of the net loss on Schedule NJ-BUS-2 and carry the rest forward. Budget bill A5323 cuts the 50% to 25% for gross income over $500,000 and to zero at $1,000,000 or more, for tax years beginning on or after January 1, 2026. The enacted chapter number was not yet on the Division’s pages when this was written (verify).
Stay NJ, cut before its first full payment. Stay NJ reimburses homeowners 65 and older for half their property tax bill up to $6,500, and the income limit was $500,000. Budget bill A5327 lowered the limit to $200,000 and tiered the maximum: $6,500 at income of $100,000 or less, $5,000 at $100,001 to $150,000, $4,000 at $150,001 to $200,000. Treasury’s explainer now shows those figures and credits them to the fiscal 2027 Appropriations Act signed June 30, 2026. The cuts apply to the 2025 benefit, paid starting February 2027, and to the remaining 2024 installments; the August 2026 installment was paid at half (verify the November 2026 balance). Renters and mobile home owners are not eligible.
Already enacted, first effective in 2026
Qualified small business stock. P.L.2025, c.67 excludes gain on qualified small business stock from New Jersey gross income to the extent it is excluded federally under Internal Revenue Code section 1202, for tax years beginning on or after January 1, 2026; the Division’s 2025 update presentation confirms the date. Until now New Jersey taxed the whole gain at ordinary rates, up to 10.75%. Whether the exclusion picks up the 2025 federal expansion of section 1202 by reference is a question the Division has not answered (verify). A founder who sold in December 2025 paid New Jersey tax on the gain; one who sells in 2026 may not.
Realty transfer fee on the seller. Since July 10, 2025, the graduated fee on home sales over $1,000,000, 1% to 3.5% of the price, is owed by the seller rather than the buyer. It is not on the NJ-1040, but it comes out of the same closing.
What did not change
The 2026 NJ-1040-ES instructions carry the same rate schedules as 2025: seven brackets single, eight joint, 1.4% on the first $20,000 to 10.75% above $1,000,000, not indexed and unchanged since 2020. The exemptions are the same: $1,000 per taxpayer, $1,500 per dependent, $1,000 more at 65, $1,000 more for blind or disabled, $6,000 for a veteran. The Retirement Income Exclusion keeps its $100,000 joint and $75,000 single maximums and its $150,000 cliff. The property tax deduction is still capped at $15,000, with the $50 credit as the alternative. The NJEITC is expected to stay at 40% of the federal credit, so the 2026 maximums are to come (the 2025 maximum with three children was $3,218). The health insurance mandate stays on Schedule NJ-HCC; the 2026 Shared Responsibility Payment for an uninsured individual runs from $695 to $5,712.
Worked example: a young family’s 2025 return against its 2026 return
A married couple in Camden County, both working, wages of $68,000, two children ages 2 and 4, renting at $1,800 a month, no child care expenses. Nothing about them changed from 2025 to 2026. Their New Jersey return did.
| 2025 return | 2026 return | |
|---|---|---|
| Wages (Line 15) | $68,000 | $68,000 |
| Exemptions: 2 × $1,000 + 2 × $1,500 | −$5,000 | −$5,000 |
| Property tax deduction: 18% of $21,600 rent | −$3,888 | −$3,888 |
| New Jersey taxable income | $59,112 | $59,112 |
| Tax (Table B: $59,112 × 2.45% − $420) | $1,028 | $1,028 |
| Child Tax Credit, two children, $50,001–$60,000 tier | −$800 | −$1,000 |
| Tax after credit, before withholding | $228 | $28 |
The $200 difference is the whole of the 2026 change for this family. Had their taxable income been $60,001 instead of $59,112, the credit would have been $250 per child in 2026 and $200 in 2025, so a $500 raise would have cost them $500 of credit. Anyone within a few hundred dollars of a tier line should look at a 401(k) deferral, the one retirement contribution that reduces New Jersey wages.
Behind the scenes: why federal tax cuts stop at the Delaware
New Jersey’s Gross Income Tax Act names its own categories of income and adopts pieces of the Internal Revenue Code one section at a time, by citation. There is no conformity date to update and nothing flows in by default. That is why the Division could answer the 2025 federal law with a short notice rather than a bill, and why the Legislature never had to vote on tips or overtime. It is also why the state’s own breaks are so few: each one, the pension exclusion, the property tax deduction, the medical deduction over 2%, the college deductions, had to be written into New Jersey law on its own. The 2026 changes follow the pattern. The child credit grew because Trenton passed a bill; Stay NJ shrank because Trenton passed a budget; the federal act did nothing because nobody in Trenton had to do anything.
What to bring
- Last year’s NJ-1040, so the 2026 return can be compared line by line; the rates and exemptions are the same
- Birth dates for every child; the Child Tax Credit stops at age 5 and the tiers depend on Line 42 taxable income
- Rent paid in 2026 and the landlord’s address, or the 2026 property tax bills, for the deduction or $50 credit
- The 2025 ANCHOR, Senior Freeze or Stay NJ letters and the PAS-1 or ANC-1 confirmation, if 65 or older or disabled
- Form 1095 for health coverage, or the reason for a gap, for Schedule NJ-HCC
- For a business owner with more than one business: each business’s profit or loss separately, for Schedule NJ-BUS-1 and the Alternative Business Calculation
- For anyone who sold stock in a company they founded or invested in early: the issue date, purchase date and federal section 1202 computation
Questions people ask
Did New Jersey stop taxing tips and overtime?
No. The federal deductions do not reach the NJ-1040, and no New Jersey bill to match them has passed. Tips and overtime are wages on Line 15, taxed at the ordinary rates. The Division’s December 2025 notice says the federal deductions “do not affect” the New Jersey return for 2025 through 2028.
I am 67. Does the federal $6,000 senior deduction lower my New Jersey tax?
No. New Jersey gives its own $1,000 exemption at 65, the same as last year, and the Retirement Income Exclusion for pension and IRA income if total income is $150,000 or less. The federal deduction is not part of the New Jersey computation. See New Jersey for retirees.
How much is the New Jersey Child Tax Credit for 2026?
$1,250 per child 5 or younger at New Jersey taxable income of $30,000 or less, then $1,000, $750, $500 and $250 by tier up to $80,000, for tax years 2026 through 2028 under P.L.2026, c.26. The 2025 amounts were $1,000 down to $200, and the law returns to them in 2029.
Did my Stay NJ benefit get cut?
If household income is over $200,000, yes, to zero. If it is between $100,001 and $200,000, the maximum is now $5,000 or $4,000 instead of $6,500. At $100,000 or less, the benefit is still half the property tax bill up to $6,500. The change applies to the 2025 benefit paid starting February 2027 and reduced the later installments of the 2024 benefit.
Did the rates or brackets change?
No. The 2026 NJ-1040-ES rate schedules are identical to 2025: 1.4% to 10.75%, with the top rate starting at $1,000,000 for every filing status. The brackets are not indexed, so inflation moves people up through them with no change in the law.
Is there a tax question on the November 2026 ballot?
No statewide public question of any kind. New Jersey elected its governor and Legislature in 2025. The next event that can change these figures is the fiscal 2028 budget in June 2027, which sets the 2026-benefit-year amounts for ANCHOR, Senior Freeze and Stay NJ.
Same return, bigger child credit, smaller Stay NJ
Ignore the federal headlines when you sit down with the NJ-1040; the state never read them. Check the child credit tier and, if you are 65, the Stay NJ income line.
Written by Charles Trautman, EA, editor · Need to Know Tax, Lone Tree, Colorado
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Forms and official pages named in this article
- Form NJ-1040-ES instructions, 2026: rate schedules and exemptions
- Form NJ-1040 instructions, 2025 return
- Form GIT-DEP, Depreciation Adjustment Worksheet (rev. October 2025)
- New Jersey Child Tax Credit (Division page, 2025 amounts)
- S4531, the 2026–2028 Child Tax Credit increase (P.L.2026, c.26)
- Shared Responsibility Payment, 2026 amounts
Sources and where to check
- Division of Taxation: federal One Big Beautiful Bill Act and New Jersey income tax (December 1, 2025)
- Division of Taxation: 2025 Tax Update presentation (October 22, 2025)
- Treasury Explains: Stay NJ ($200,000 limit and tiers)
- EY Tax News: New Jersey enacted budget bills, June 30, 2026 (secondary)
- Division of Taxation: income tax changes for tax year 2025
- Division of Taxation: Important Income Tax Changes archive (watch for the 2026 page)
- Division of Taxation: NJEITC, 2025 maximums