New Jersey retired pay

Is military retirement taxed in New Jersey?

Not taxed

Not Taxed at Any Age Since 2001.

No. N.J.S.A. 54A:6-26 keeps military pension payments and military survivor's benefit payments for service in the Armed Forces of the United States out of New Jersey gross income, and the 2025 NJ-1040 instructions say not to report them on the return. The exclusion has applied at every age since tax year 2001; from 1998 through 2000 it reached only filers 62 or older or disabled.

The law: N.J.S.A. 54A:6-26
Current rule since: tax year 2001 at any age (P.L. 2001, c. 84, approved May 7, 2001); tax years 1998 to 2000 only at age 62 or older or if disabled (P.L. 1997, c. 409)
Where you claim it: Nowhere: the 2025 NJ-1040 instructions list U.S. military pensions and survivor's benefit payments as nontaxable retirement income that is not reported on the return (Line 20a carries only taxable pensions)

Read on New Jersey’s own sources October 10, 2026

What New Jersey’s rule is worth on your retired pay

Enter your annual taxable retired pay (box 2a of your DFAS or Coast Guard 1099-R). The rate starts at New Jersey’s 5.525% rate on single taxable income from $40,000 to $75,000 for 2026; 6.37% starts above $75,000 and the top 10.75% over $1 million for tax year 2026; change it to your own bracket if you know it.

One rate applied to the whole amount, not New Jersey’s full return: brackets, other income, deductions and credits change the real figure. Use it to compare, then check the state’s own form instructions.

How it works in New Jersey

Leave the DFAS 1099-R off the return entirely. The 2025 NJ-1040 instructions put U.S. military pensions and survivor's benefit payments on the list of nontaxable retirement income you do not report, so Line 20a, the taxable pension line, should carry none of it. GIT-7, the Division of Taxation's January 2026 bulletin for military families, gives the same instruction.

The pension stays out of the filing test too. The instructions say not to count military pensions or survivor's benefits when deciding whether you must file, and the threshold is gross income above $10,000 for single filers or $20,000 for married couples filing jointly. A couple living on an assumed $45,000 of retired pay and $30,000 of Social Security, which New Jersey also exempts, has no New Jersey filing requirement on that income alone.

Other retirement income gets New Jersey's general exclusion on Line 28a. If you or your spouse were 62 or older, or blind or disabled, at year end and Line 27 income was $150,000 or less, you can exclude up to $100,000 of pensions, annuities and IRA withdrawals on a joint return ($75,000 single), with smaller percentages between $100,001 and $150,000. Because the military pension never reaches Line 27, it does not count against that $150,000 test.

Claim the $6,000 veteran exemption on Line 9 as well. It is open to a veteran honorably discharged or released under honorable circumstances from active duty; a spouse on a joint return who is also a qualifying veteran takes a second $6,000; and the Division wants documentation listing your character of service the first time you claim it. At the 5.525% rate one exemption is worth about $332 a year, and more in the higher brackets.

If an earlier return reported the pension, file Form NJ-1040X for that year. The instructions allow three years from the return's due date, including extensions, to request a refund, so a 2023 return due April 15, 2024 can be amended until April 15, 2027.

Survivor Benefit Plan annuities

Exempt. The statute excludes military survivor's benefit payments, and GIT-7 (January 2026) says the reduced pension a retiree receives after joining the Survivor Benefit Plan is not taxable regardless of age or disability, and the amount paid to the surviving beneficiary after the retiree's death is not taxable as pension income either.

Active-duty pay in New Jersey

Taxed for residents and reported as wages; combat zone pay is excluded for tax year 2021 and later (P.L. 2020, c. 93). GIT-7 treats a New Jersey domiciliary as a nonresident for a year in which the member keeps no permanent home in New Jersey, keeps one outside it, and spends no more than 30 days in the state.

Missed it in an earlier year?

Generally, you have three years from the date the return was due (including extensions) to request a refund (2025 NJ-1040 instructions). Amend on Form NJ-1040X.

What trips New Jersey retirees up

A Civil Service annuity from the Office of Personnel Management is taxable in New Jersey even when it is based in part on credit for military service. GIT-7, the Division's military page and the 2025 instructions all say so, which catches retirees who went from uniform to a federal civilian job.
GIT-7 lists the Army, Navy, Air Force, Marine Corps and Coast Guard and names neither the Space Force nor the NOAA or Public Health Service commissioned corps. The statute's words are service in the Armed Forces of the United States; federal law (10 U.S.C. § 101(a)(4)) places the Space Force among the armed forces but not the NOAA or PHS corps, and the Division has not addressed those two (read October 10, 2026).
The statute excludes military pension payments paid to individuals by the United States for Armed Forces service without naming the member. Whether that reaches a former spouse's court-ordered share of the retired pay is not addressed in GIT-7 or the 2025 instructions.
Retirees under 62 paid New Jersey tax on retired pay through 2000. P.L. 1997, c. 409 started the exclusion in 1998 only for those 62 or older or disabled, and P.L. 2001, c. 84 struck the age test, applying retroactively to taxable years beginning on or after January 1, 2001.

Federal side: DFAS reports retired pay on Form 1099-R, and the IRS taxes it as a pension. VA disability compensation is not taxable income under federal law (IRS Publication 525). The SCRA’s tax-home rule (50 U.S.C. § 4001) protects servicemembers on orders, not retirees, so where a retiree lives decides which state taxes the pension. Compare every state on the 51-state ledger. New Jersey’s other servicemember protections are on the New Jersey SCRA page.

Frequently asked questions

Does New Jersey tax military retirement pay?

No. N.J.S.A. 54A:6-26 says gross income does not include military pension payments or military survivor's benefit payments paid by the United States for service in the Armed Forces. The 2025 NJ-1040 instructions list U.S. military pensions among nontaxable retirement income that you do not report anywhere on the return, and the exclusion has applied at every age since tax year 2001 under P.L. 2001, c. 84. The Division of Taxation's GIT-7 bulletin (January 2026) and its military page, read October 10, 2026, say the same.

Is SBP taxed in New Jersey?

No. N.J.S.A. 54A:6-26 excludes military survivor's benefit payments, and GIT-7 (January 2026) says that when a retiree accepts a reduced pension to join the Survivor Benefit Plan, the reduced pension is not taxable regardless of age or disability status. After the retiree's death, the amount paid to the surviving beneficiary is not taxable as pension income either. A surviving spouse leaves the DFAS annuity off the NJ-1040, the same way the retiree left off the retired pay (read October 10, 2026).

Is a federal civil service pension with military buyback taxed in New Jersey?

Yes. The 2025 NJ-1040 instructions list Civil Service pensions and annuities from the U.S. Office of Personnel Management as taxable retirement income, even if based on credit for military service, and GIT-7 repeats it. Report that annuity on Line 20a. If you are 62 or older, or blind or disabled, and your Line 27 income is $150,000 or less, the Line 28a pension exclusion can still shelter up to $75,000 of it for a single filer or $100,000 on a joint return. The military retired pay itself stays off the return.

Do I have to file a New Jersey return if I only have military retired pay?

No. The 2025 NJ-1040 instructions tell you not to count U.S. military pensions and survivor's benefit payments, or Social Security, when deciding whether you must file. You must file only if your other gross income from everywhere exceeds $10,000 single or married filing separately, or $20,000 for joint filers, heads of household and qualifying widow(er)s. You should still file if New Jersey tax was withheld and you are due a refund, or to claim a credit that pays a refund, according to the same instructions.

Sources, read October 10, 2026

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