Military veterans who were honorably discharged or released under honorable circumstances are eligible for a $6,000 exemption on New Jersey Income Tax returns.
Military pay is taxable for New Jersey residents, including combat zone pay received in 2020 and prior.
For Tax Year 2021 and after, combat pay is not taxable in New Jersey (P.L. 2020, c. 93). The law also exempts service people from paying New Jersey Income Tax on their wages if they are being hospitalized for an injury from a combat zone. Do not include amounts received as combat zone compensation when reporting your gross income on a New Jersey Income Tax return (Form NJ-1040). The law uses federal definitions of combat zone pay to exclude, from New Jersey Gross Income Tax, the same pay that is excluded for federal income tax purposes. This law is not retroactive. For Tax Year 2020 and prior, combat pay is still taxable income.
Mustering-out payments, subsistence and housing allowances, and U.S. military pension and survivor's benefit payments are not taxable.