Active-duty pay
Taxed
Active-duty pay taxable; combat zone exempt.
State Guide · NJ
New Jersey — Military Tax Treatment
New Jersey taxes active duty and Guard pay but fully exempts military retirement. The 100% P&T disabled veteran property tax exemption is one of the most valuable in the country — $0 property tax on your primary residence.
Tax treatment at a glance
Guard & Reserve drill pay
Taxed
Guard and Reserve drill pay is taxable New Jersey income. Pay during state emergency activation may qualify for different treatment — verify with NJ DoT.
Military retirement pay
Fully Exempt
Military retirement pay fully exempt.
The numbers · verified for tax year 2025
Top marginal rate
10.75%
Retirement-pay exemption
Full
New Jersey does not tax U.S. military pensions or Survivor Benefit Plan payments — fully exempt, not even reported on the NJ return, regardless of age or amount. Note: ordinary military wages of NJ residents ARE taxable; only pensions, combat pay, and certain allowances are exempt.
Standard deduction
New Jersey has no standard deduction; it uses personal exemptions ($1,000 per person). The 10.75% top rate applies only to income over $1M.
VA disability compensation
Always tax-free
Federally tax-free under 38 USC § 5301. No state taxes VA disability compensation as income — New Jersey included.
Survivor Benefit Plan (SBP)
Follows retirement
New Jersey exempts military retirement — SBP annuities are generally exempt.
Federal rules that override state law
SCRA — Servicemembers Civil Relief Act
Active-duty servicemembers pay state income tax only to their state of legal domicile — not the state where they are stationed. If you are from Texas and stationed in New Jersey, New Jersey cannot tax your military pay. This applies during all active duty periods and during Guard/Reserve mobilizations on federal (Title 10) orders.
MSRRA — Military Spouses Residency Relief Act
Military spouses can maintain their home-state domicile even when living in a different state due to their servicemember's orders. A spouse who is a Texas resident following their servicemember to New Jersey can keep Texas as their tax domicile and avoid New Jersey state income tax on their wages.
Guard & Reserve — the SCRA gap
SCRA pay protections apply during federal (Title 10) activation orders. During routine drill weekends and state-only activations, Guard and Reserve members are state residents serving in their home state — SCRA does not protect their drill pay from state income tax. Whether New Jersey exempts that pay is the state-specific question answered above.
Filing watch-outs
- 01Retirement exemption: NJ-1040 income exemption for military pension income
- 02Guard members: routine drill pay is taxable NJ income
- 03Disabled vet property tax exemption: apply through your municipality — separate from income tax filing
Veteran-specific tax benefits
100% disabled vet property tax exemption + $250 deduction for all honorably-discharged vets.
Official authority
https://www.state.nj.us/treasury/taxation/ ↗State tax law changes annually. Verify current rules with the New Jersey Department of Revenue before making any tax decision.
New Jersey military tax — common questions
Does New Jersey tax military retirement pay in 2026?
New Jersey fully exempts military retirement pay. Military retirement pay fully exempt.
Does New Jersey tax active-duty military pay?
New Jersey taxes active-duty military pay for state residents. Active-duty pay taxable; combat zone exempt. Under the SCRA, New Jersey can only tax the military pay of service members who are legally domiciled in New Jersey — not those merely stationed there.
Does New Jersey tax National Guard and Reserve drill pay?
New Jersey taxes Guard and Reserve drill pay. Guard and Reserve drill pay is taxable New Jersey income. Pay during state emergency activation may qualify for different treatment — verify with NJ DoT.
Is VA disability compensation taxed in New Jersey?
No. VA disability compensation is federally tax-free under 38 U.S.C. § 5301, and no state — including New Jersey — taxes it as income.
If I'm stationed in New Jersey but claim another state, can New Jersey tax my military pay?
No. Under the Servicemembers Civil Relief Act (SCRA), active-duty pay is taxable only by your state of legal domicile, not the state where you are stationed. If your domicile is elsewhere, New Jersey cannot tax your active-duty military pay. Military spouses get the same protection under the MSRRA.
Related tools
Other state guides