What Taxes Are Taken Out of a Paycheck in New Jersey?
Understand the components of a New Jersey paycheck. Learn how mandatory deductions and personal financial choices combine to determine your actual take-home pay.
When you receive a paycheck in New Jersey, your net pay is less than your gross pay because of deductions. These are primarily taxes your employer withholds as calculated payments toward your annual federal and state tax obligations. In addition to mandatory taxes, your paycheck might also reflect voluntary deductions you have elected, such as contributions to retirement savings plans or payments for health insurance premiums.
Federal Taxes Withheld From Your Paycheck
Deductions from your New Jersey paycheck are directed to the federal government for three distinct taxes. Federal income tax is progressive, meaning the rate increases as your income rises through a series of brackets. For 2025, these rates range from 10% to 37%.
The other federal taxes fall under the Federal Insurance Contributions Act (FICA). The first part of FICA is the Social Security tax, which funds retirement, disability, and survivor benefits. For 2025, employees pay 6.2% on their earnings up to an annual wage limit of $176,100. Once your year-to-date earnings exceed this cap, the Social Security tax withholding stops for the remainder of the year.
The second component of FICA is the Medicare tax, designated to fund hospital insurance for individuals aged 65 and older. The employee tax rate for 2025 is 1.45% of all earnings, with no wage limit. High-income earners are subject to an Additional Medicare Tax of 0.9% on wages exceeding $200,000 for single filers and $250,000 for those married filing jointly. This additional tax is paid only by the employee.
New Jersey State-Mandated Deductions
In addition to federal taxes, your paycheck is subject to several deductions mandated by New Jersey. The most prominent is the state income tax, which is a progressive tax with 2025 rates ranging from 1.4% to 10.75%. Your paycheck also contributes to several state insurance programs through the following payroll deductions:
- Unemployment Insurance (UI) and Workforce Development/Supplemental Workforce Funds (WD/SWF): These programs provide temporary financial assistance to workers who lose their jobs and fund job training initiatives. For 2025, the total employee contribution rate is 0.425% on the first $43,300 of an employee’s wages.
- Family Leave Insurance (FLI): This insurance provides benefits to workers who need time off to bond with a new child or care for a seriously ill family member. For 2025, the employee contribution rate is 0.33% on the first $165,400 of wages.
- State Disability Insurance (SDI): This program provides partial wage replacement to employees unable to work due to a non-work-related illness or injury, including pregnancy. For 2025, the employee contribution rate is 0.23% on the first $165,400 of wages.
Key Forms for Determining Your Withholding
The amount of income tax withheld from your pay is determined by information you provide on two documents. The federal Form W-4, “Employee’s Withholding Certificate,” guides your employer in calculating federal income tax withholding. The W-4 uses a five-step process where you provide your filing status and make adjustments based on your financial situation.
The form no longer uses “allowances.” Instead, you can account for multiple jobs or a working spouse. You can also account for dependents to determine your eligibility for the Child Tax Credit, list other income, claim deductions, or request extra withholding to fine-tune your tax payments.
For state purposes, New Jersey uses Form NJ-W4, “Employee’s Withholding Allowance Certificate.” This document is tailored to the state’s income tax system and, unlike the federal form, still uses allowances to adjust your withholding. You will enter the number of allowances you are claiming and can also specify an additional dollar amount to be withheld from each paycheck.
Understanding Voluntary Paycheck Deductions
Your paycheck may also show voluntary deductions you have chosen for benefits and savings plans. These deductions can be pre-tax or post-tax, which impacts your take-home pay and tax liability. Common examples include:
- Premiums for health, dental, and vision insurance
- Contributions to retirement plans like a 401(k) or 403(b)
- Payments for life insurance policies
- Contributions to a Health Savings Account (HSA) or Flexible Spending Account (FSA)
Pre-tax deductions are subtracted from your gross pay before income taxes are calculated, which lowers your taxable income and reduces the amount of income tax you owe. Contributions to a traditional 401(k), health insurance premiums, and HSA funds are common pre-tax deductions.
Post-tax deductions are taken from your pay after all applicable taxes have been withheld. These do not provide an immediate tax advantage but can offer future benefits. For example, contributions to a Roth 401(k) are made with post-tax dollars, meaning qualified withdrawals in retirement are tax-free.