New Jersey State Tax Deductions


New Jersey has easy access to the shore and close proximity to New York City, Philadelphia and Atlantic City. It also ranks among the country's most expensive places to live, with high property and other taxes. New Jersey taxpayers are eligible for certain deductions on state tax returns. Year-round residents may deduct amounts paid all year, while part-time residents may only include deductions paid while living in New Jersey.

Medical Expenses

Most medical expenses exceeding two percent of your gross income are deductible, and the state allows the same expenses as the federal income tax. Only those expenses incurred by the taxpayer, the spouse or civil union partner and dependents qualify. Only un-reimbursed expenses from the insurance carrier are eligible for deduction. These include doctor or dental visits, hospitalization, medications, vision exams and eyeglasses, and diagnostic services. Insurance premiums qualify as deductions if exceeding the income limit, as are transportation expenses for medical reasons. Any deductions for medical expenses one year that are reimbursed the following year are considered income for the payment year.

Property Tax Deduction

Homeowners or tenants paying property taxes on the principal residence, either to the municipality or through rent, may qualify for a deduction for homeowners or a credit refund for tenants on the state income tax return. Certain residents may deduct up to the entire amount of property taxes paid or up to the limit of $10,000, whichever is the lesser amount. Qualifications depend on the amount of taxable income, property taxes or rent amounts and filing status. At the time of publication, for tenants, 18 percent of the yearly rent paid is the equivalent of paid property taxes.

Health Insurance Deductions

Self-employed residents for federal tax purposes may deduct the amount paid for health insurance for the taxpayer, spouse or civil union partner, and dependents. Deductions amounts cannot exceed earned income derived from the self-employed resident's business carrying the insurance plan.

Those receiving primary care health services from practices located in or within five miles of a New Jersey Health Enterprise Zone may be able to deduct insurance premiums on the state income tax returns.

Alimony and Maintenance

Residents may deduct alimony and separate maintenance payments required under a divorce or separate maintenance decree to a former or separated spouse or civil union partner. Child support payments are not deductible.

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