NJ Income Tax - Deductions
New Jersey allows you to deduct certain medical expenses, qualified Archer medical savings account (MSA) contributions, health insurance costs of the self-employed, alimony or separate maintenance payments, qualified conservation contributions, and a health enterprise zone deduction on your income tax return.
Full-year residents may deduct only amounts paid during the tax year. Part-year residents may only include those amounts paid while they were New Jersey residents.
Federal deductions such as mortgage interest, employee business expenses, moving expenses, and IRA and Keogh Plan contributions are not deductible on the New Jersey return.
Medical Expenses. Certain medical expenses in excess of 2% of your gross income may be deducted. In general, medical expenses allowed for Federal income tax purposes are also allowed for New Jersey purposes. Only medical expenses for yourself, your spouse/civil union partner or domestic partner, and your dependents qualify. These expenses must not be reimbursed by your insurance or similar provider. Some examples of allowable medical expenses are payments for doctor's visits, dental care, hospital care, eye examinations, eyeglasses, medicine, and x-rays or other diagnostic services directed by your physician or dentist. Insurance premiums, including amounts paid under Social Security for Medicare, can be used as medical deductions. You may also deduct transportation costs which are allowable on your Federal return. If you deduct medical expenses in one year and are reimbursed in the next, you must include the reimbursement as income in the year you receive the payment.
Archer MSA Contributions. New Jersey follows the Federal guidelines governing the deduction of Archer MSA contributions. Your contribution may not exceed 75% of the amount of your annual health plan deductible (65% if you have a self-only plan). You must enclose Federal Form 8853 with your New Jersey tax return if you claim this deduction. Excess contributions that you withdraw before the due date of your tax return are not taxable. However, you must report the earnings associated with the excess contributions you withdraw as wages on the "Wages, salaries, tips, and other employee compensation" line of your tax return.
Self-Employed Health Insurance Deduction. If you are considered a self-employed individual for Federal income tax purposes, or you received wages from an S corporation in which you were a more-than-2% shareholder, you may deduct the amount you paid during the year for health insurance for yourself, your spouse/civil union partner or domestic partner, and your dependents. The amount of the deduction may not exceed the amount of your earned income, as defined for Federal income tax purposes, derived from the business under which the insurance plan is established.
Alimony and Separate Maintenance Payments. You may deduct the amount of alimony and separate maintenance you paid which was required under a decree of divorce/dissolution or separate maintenance. Do not deduct payments paid for child support.
Qualified Conservation Contributions. You may deduct any contribution you made for conservation purposes of a qualified real property interest in property located in New Jersey. You must enclose a copy of Federal Form 8283 with your New Jersey income tax return if you are required to file Form 8283 with your Federal return.
Health Enterprise Zone Deduction. Eligible taxpayers who provide “primary care” medical and/or dental services at a qualified practice located in or within five miles of a Health Enterprise Zone (HEZ) may be eligible for a deduction on their personal income tax returns. Partners and S corporation shareholders of a qualified practice enter the HEZ deduction amount listed on Schedule NJK-1, Form NJ-1065, or Schedule NJ-K-1, Form CBT-100S. Sole proprietors must calculate the amount of their HEZ deduction. See Technical Bulletin TB-56, Health Enterprise Zones, for eligibility requirements and how to calculate the HEZ deduction.
Full-year residents may deduct only amounts paid during the tax year. Part-year residents may only include those amounts paid while they were New Jersey residents.
Federal deductions such as mortgage interest, employee business expenses, moving expenses, and IRA and Keogh Plan contributions are not deductible on the New Jersey return.
Medical Expenses. Certain medical expenses in excess of 2% of your gross income may be deducted. In general, medical expenses allowed for Federal income tax purposes are also allowed for New Jersey purposes. Only medical expenses for yourself, your spouse/civil union partner or domestic partner, and your dependents qualify. These expenses must not be reimbursed by your insurance or similar provider. Some examples of allowable medical expenses are payments for doctor's visits, dental care, hospital care, eye examinations, eyeglasses, medicine, and x-rays or other diagnostic services directed by your physician or dentist. Insurance premiums, including amounts paid under Social Security for Medicare, can be used as medical deductions. You may also deduct transportation costs which are allowable on your Federal return. If you deduct medical expenses in one year and are reimbursed in the next, you must include the reimbursement as income in the year you receive the payment.
Archer MSA Contributions. New Jersey follows the Federal guidelines governing the deduction of Archer MSA contributions. Your contribution may not exceed 75% of the amount of your annual health plan deductible (65% if you have a self-only plan). You must enclose Federal Form 8853 with your New Jersey tax return if you claim this deduction. Excess contributions that you withdraw before the due date of your tax return are not taxable. However, you must report the earnings associated with the excess contributions you withdraw as wages on the "Wages, salaries, tips, and other employee compensation" line of your tax return.
Self-Employed Health Insurance Deduction. If you are considered a self-employed individual for Federal income tax purposes, or you received wages from an S corporation in which you were a more-than-2% shareholder, you may deduct the amount you paid during the year for health insurance for yourself, your spouse/civil union partner or domestic partner, and your dependents. The amount of the deduction may not exceed the amount of your earned income, as defined for Federal income tax purposes, derived from the business under which the insurance plan is established.
Alimony and Separate Maintenance Payments. You may deduct the amount of alimony and separate maintenance you paid which was required under a decree of divorce/dissolution or separate maintenance. Do not deduct payments paid for child support.
Qualified Conservation Contributions. You may deduct any contribution you made for conservation purposes of a qualified real property interest in property located in New Jersey. You must enclose a copy of Federal Form 8283 with your New Jersey income tax return if you are required to file Form 8283 with your Federal return.
Health Enterprise Zone Deduction. Eligible taxpayers who provide “primary care” medical and/or dental services at a qualified practice located in or within five miles of a Health Enterprise Zone (HEZ) may be eligible for a deduction on their personal income tax returns. Partners and S corporation shareholders of a qualified practice enter the HEZ deduction amount listed on Schedule NJK-1, Form NJ-1065, or Schedule NJ-K-1, Form CBT-100S. Sole proprietors must calculate the amount of their HEZ deduction. See Technical Bulletin TB-56, Health Enterprise Zones, for eligibility requirements and how to calculate the HEZ deduction.
