Complete Guide to New Jersey LLC Taxes in 2025
New Jersey presents one of the most complex and highest-tax environments for LLC owners in the United States. With progressive income tax brackets ranging from 1.4% to a top rate of 10.75%, a $75 annual report fee, and high property taxes, the Garden State demands careful tax planning. However, New Jersey's strategic location between New York and Philadelphia, combined with its PTE tax election for SALT cap workaround, offers some offsetting advantages. This guide covers everything you need to know about New Jersey LLC taxation.
How New Jersey Taxes LLCs
New Jersey treats LLCs as pass-through entities for state tax purposes. The LLC itself does not pay New Jersey income tax. Instead, profits pass through to individual members who report their share on their personal New Jersey Gross Income Tax returns (Form NJ-1040).
For a single-member LLC, income flows to Schedule C of the federal return and then to New Jersey Form NJ-1040. For a multi-member LLC, the LLC files New Jersey Form NJ-1065 (Partnership Return) as an informational return.
New Jersey does not impose a separate entity-level franchise tax on pass-through LLCs (corporations pay the Corporation Business Tax). However, the high progressive income tax rates mean that high-earning LLC members face substantial state tax bills, particularly at the 10.75% top bracket.
Key Point: New Jersey's 10.75% top rate applies to taxable income over $1 million. This is one of the highest state income tax rates in the country, exceeded only by California's 13.3%. Combined with federal taxes, high-earning New Jersey LLC owners can face total effective rates exceeding 50%.
New Jersey Income Tax Brackets (2025)
| Taxable Income (Single) | Rate | MFJ Threshold |
|---|---|---|
| $0 - $20,000 | 1.40% | $0 - $20,000 |
| $20,001 - $35,000 | 1.75% | $20,001 - $50,000 |
| $35,001 - $40,000 | 3.50% | $50,001 - $70,000 |
| $40,001 - $75,000 | 5.525% | $70,001 - $80,000 |
| $75,001 - $500,000 | 6.37% | $80,001 - $150,000 |
| $500,001 - $1,000,000 | 8.97% | $150,001 - $500,000 |
| Over $1,000,000 | 10.75% | Over $1,000,000 |
New Jersey LLC Annual Filing Requirements
- Annual Report: $75 fee, due on the LLC's formation anniversary, filed with the Division of Revenue
- State Tax Returns: Form NJ-1040 (individual) or Form NJ-1065 (partnership)
- Estimated Tax Payments: Required if expecting to owe $400 or more
- Sales Tax Filing: File with the Division of Taxation on assigned schedule
- NJ-1065 filing fee: $150 per member per year (capped at $250,000)
Hidden Cost: Multi-member New Jersey LLCs must pay a per-member filing fee of $150 per member per year when filing the NJ-1065 partnership return. For a 2-member LLC, that is an additional $300 beyond the $75 annual report. This fee is unique to New Jersey and often catches LLC owners by surprise.
New Jersey Pass-Through Business Alternative Income Tax (BAIT)
New Jersey offers a Pass-Through Business Alternative Income Tax (BAIT) election that serves as a SALT cap workaround:
- The LLC can elect to pay an entity-level tax using the same graduated rates (1.4-10.75%)
- Members receive a credit on their individual NJ returns for their share of BAIT paid
- The entity-level payment is deductible on the federal partnership return
- Election must be made by the original or extended due date of the return
New Jersey Sales Tax
New Jersey imposes a 6.625% state sales tax with no local additions:
- Rate: 6.625% statewide (uniform, no local taxes)
- Clothing: Exempt from sales tax
- Food: Grocery items are exempt
- Urban Enterprise Zones: Reduced 3.3125% rate in designated areas
- Services: Most services are not taxable
New Jersey LLC vs. Other States
| State | Income Tax | Annual Fee | Key Feature |
|---|---|---|---|
| New Jersey | 1.4-10.75% | $75 + $150/member | High top rate, per-member fee |
| New York | 4-10.9% | $9 | NYC additional tax possible |
| Pennsylvania | 3.07% flat | $70 | Low flat rate |
| Connecticut | 3-6.99% | $80 | Moderate rates |
| Delaware | 0-6.6% | $300 | Popular for formation |
| Maryland | 2-5.75% + local | $300 | County taxes add 2-3% |
New Jersey LLC Formation Costs
- Certificate of Formation: $125 with the Division of Revenue
- Registered Agent: Required; professional service $50-200/year
- Annual Report: $75/year
- NJ-1065 per-member fee: $150/member/year (multi-member LLCs)
- EIN: Free from the IRS
New Jersey Tax Deductions
- No standard deduction: New Jersey does not offer a standard deduction
- Personal exemption: $1,000 per person
- Property tax deduction: Up to $15,000 for property taxes paid
- Health insurance: Self-employed deduction allowed
- Retirement contributions: NJ does not allow deductions for IRA/401(k) contributions (major difference from federal)
Important: New Jersey does not allow deductions for retirement plan contributions (IRA, 401(k), SEP-IRA) on the state return. This is a significant departure from federal rules and most other states, increasing effective state tax liability for LLC owners who make large retirement contributions.
Common New Jersey LLC Tax Mistakes
- Forgetting the per-member fee: The $150/member NJ-1065 filing fee is unique and often overlooked
- Assuming retirement deductions: NJ does not allow retirement contribution deductions
- Not using the BAIT election: Can save significantly on federal taxes through the SALT cap workaround
- Underestimating the top rate: 10.75% on income over $1M is among the highest in the nation
- Missing estimated payment deadlines: The $400 threshold is relatively low
New Jersey Resources
- NJ Division of Taxation: nj.gov/treasury/taxation -- tax forms, payments
- Division of Revenue: nj.gov/treasury/revenue -- business filings, annual reports
- Tax Customer Service: (609) 292-6400