New Jersey does not tax Social Security Disability Insurance (SSDI) benefits at the state level

If you live in New Jersey and receive SSDI, the state will not take a portion of your benefits as income tax. New Jersey is one of a smaller group of states that exempts SSDI from state income tax entirely. This means your SSDI check arrives untouched by state tax withholding, regardless of how much you earn or what other income you have.

The federal government may still tax your SSDI depending on your total income—that rule has not changed. But New Jersey itself does not participate in that taxation. If you file a New Jersey state tax return, SSDI does not count as taxable income on that form.

Key Takeaways

  • New Jersey exempts all SSDI benefits from state income tax, so you will not owe state tax on those payments.
  • Federal taxation of SSDI still applies based on your combined income, and that is separate from New Jersey's rule.
  • If you have other income besides SSDI, you may still owe New Jersey state tax on that income.
  • You do not need to report SSDI as income when you file your New Jersey state return.

Why New Jersey exempts SSDI but not all disability income

New Jersey's tax code specifically carves out SSDI and Supplemental Security Income (SSI) from state taxation. The state treats these federal disability programs differently from other sources of income because they are federal benefit programs designed for people with disabilities and limited resources.

However, the exemption applies only to SSDI and SSI. If you receive disability benefits from another source—workers' compensation, a private disability insurance policy, a state disability program, or a pension from your employer marked as disability—New Jersey may tax those. The exemption is narrow and specific to the two federal Social Security programs.

What counts as income on your New Jersey state return

When you file your New Jersey state income tax return, you report wages, self-employment income, interest, dividends, capital gains, rental income, and most other sources. SSDI does not appear on that list. You straightforward do not include it.

If you work part-time or have other income while receiving SSDI, that income is still taxable to New Jersey. The exemption covers only the SSDI itself. So if you earn $15,000 in wages and receive $12,000 in SSDI, New Jersey taxes only the $15,000.

Federal taxation still applies to SSDI in New Jersey

New Jersey's exemption does not affect federal tax rules. The IRS may tax your SSDI if your combined income exceeds certain thresholds. Those thresholds depend on your filing status and what other income you have—wages, interest, pensions, and other sources all count toward the total.

If you are single and your combined income (including half your SSDI) exceeds $25,000, some of your SSDI becomes taxable federally. If you are married filing jointly, the threshold is $32,000. These are the 2024 thresholds; they adjust slightly each year. You would owe federal tax on the taxable portion, but New Jersey would still owe nothing.

How to handle SSDI on your New Jersey return

You do not need to do anything special. When you file your New Jersey state return, straightforward omit SSDI from your income. If you use tax software, it usually has a field for SSDI income; leave it blank or enter zero. If you use a tax preparer, tell them you receive SSDI so they know not to include it.

If you also receive SSI (Supplemental Security Income), that is also exempt from New Jersey state tax. Report only your other income sources. Keep your Social Security statement (Form SSA-1099) for your records, but do not report the SSDI amount on your state return.

What happens if you move to another state

If you move out of New Jersey, the tax treatment of your SSDI changes based on your new state's rules. Some states, like Pennsylvania and Illinois, also exempt SSDI. Others tax it like any other income. A few states have partial exemptions or exemptions only for people below certain income levels.

If you are planning to move or split time between states, check the tax rules of your new state before you go. Your SSDI amount does not change, but your tax bill might.

Frequently Asked Questions

Do I have to report SSDI on my New Jersey tax return at all?

No. SSDI is exempt from New Jersey state income tax, so you do not report it as income on your state return. You only report other income you may have, such as wages or interest.

If I work and receive SSDI, do I owe New Jersey tax on my wages?

Yes. Your wages are taxable to New Jersey. The SSDI exemption covers only the disability benefits themselves, not your other income. You report your wages normally and omit the SSDI.

Does New Jersey tax SSI the same way as SSDI?

Yes. Both SSDI and SSI are exempt from New Jersey state income tax. If you receive either or both, neither amount is reported as income on your state return.

Will I owe federal tax on my SSDI even though New Jersey does not tax it?

Possibly. New Jersey's exemption does not affect federal rules. If your total income is high enough, the IRS may tax part of your SSDI. Check the federal thresholds based on your filing status and other income sources.

What if I receive disability income from my employer's pension plan instead of SSDI?

That is different. Employer pension income, even if labeled disability, is usually taxable to New Jersey. The exemption applies only to federal SSDI and SSI. Check with a tax preparer if you are unsure whether your specific pension qualifies.