New Jersey payroll taxes: Your 2025 guide to staying compliant

Thanks to its prime location near economic powerhouses like New York City and Philadelphia, and a diverse mix of industries spanning logistics, finance, life sciences, and manufacturing, New Jersey provides a strong foundation for small business growth. It's no surprise the state ranks 11th nationally in the number of small businesses, with more than 861,000 and counting. However, behind every growing business lies a lengthy list of responsibilities, including managing payroll taxes.

Employers in New Jersey are required to withhold specific amounts from employee paychecks, and in many cases, contribute a share to support programs such as Social Security and Medicare. This 2025 guide breaks down exactly what you need to know to stay compliant and confident as an employer in New Jersey.

Jump to:

• What are payroll taxes?
• Understanding New Jersey state payroll taxes
• Other important tax considerations
• Employer responsibilities for payroll taxes in New Jersey
• Filing payroll tax returns in New Jersey
• Common payroll tax mistakes in New Jersey (and how to avoid them)
• How to manage your small business payroll obligations
• Leverage payroll software for compliance in New Jersey

What are payroll taxes?

Payroll taxes are taxes based on wages, salaries, or other compensation that both employers and employees must pay. While income taxes are also withheld through payroll, payroll taxes specifically fund programs like Social Security, Medicare, and unemployment insurance.

Understanding New Jersey state payroll taxes

When starting a business in New Jersey, you'll need to understand both federal and state payroll taxes.

Federal payroll taxes

Payroll taxes are mandatory and encompass both federal and state requirements. 

Federal payroll taxes include:

• Federal income tax: This is withheld from each employee's paycheck based on their W-4 form and the current IRS tax brackets. You'll be responsible for calculating the correct amount, withholding it, and then sending it to the IRS.
• Social Security and Medicare taxes: Both of these taxes have a portion paid by the employee and a matching portion paid by you, the employer. For Social Security, the combined rate is 12.4% on the first $176,100 of wages in 2025. For Medicare, it's 2.9% on all wages, with an extra 0.9% for higher earners. You'll withhold the employee's portion and match it.
• Federal Unemployment Tax (FUTA): This is paid solely by you at a rate of 6% on the first $7,000 of each employee's wages. However, most employers get a 5.4% credit, reducing the rate to 0.6%. The graphic below lists some best practices for managing your FUTA obligations.

New Jersey state payroll taxes

In addition to federal payroll taxes, New Jersey employers must comply with several state-specific taxes.

• New Jersey state income taxes: You must withhold state income tax from each employee's paycheck, based on their NJ-W4 form and New Jersey's current tax brackets. You're responsible for calculating the correct amount, withholding it, and sending it to the New Jersey Division of Taxation.
• Unemployment Insurance (UI): Both employers and employees contribute to New Jersey's unemployment insurance program. As an employer, you pay a UI tax based on your assigned rate, which starts at 2.9825% for new businesses. This rate applies to the first $43,300 of each employee's wages. 
• Temporary Disability Insurance (TDI): TDI provides short-term benefits for employees who can't work due to non-work-related illness or injury. Employees contribute 0.23% of their wages, up to $165,400.
• Employers also pay into the program if they use the state plan and receive a state-assigned rate.
• Family Leave Insurance (FLI): FLI allows employees to take paid time off to care for a new child or a seriously ill family member. It's funded entirely by employees. You must withhold 0.33% of employee wages, up to the first $165,400 of those wages.

New Jersey local payroll taxes

Some New Jersey cities charge additional payroll taxes on top of the state-required ones. For example, Newark and Jersey City both levy a 1% payroll tax on employers. Here are ways to determine any local payroll taxes you may be liable for:

1. Check with your local government to find out if your business is subject to any local payroll taxes. Your city or county government can provide the most up-to-date information on applicable rates and regulations.
2. Consult a tax professional if you're unsure about local tax requirements. An accountant specializing in New Jersey payroll taxes can help you navigate any regulations and make sure your business remains compliant.

Other important tax considerations

Multiple locations

If your business has employees working in multiple cities, you may be subject to different local payroll taxes for each location. Note that local payroll taxes are based on the physical work location, not the location where your business is registered.

Changing rates

Local payroll tax rates can change over time, so it's important to stay informed about any updates that may affect your business.

Employer responsibilities for payroll taxes in New Jersey

As a New Jersey employer, you're responsible for managing a complex array of federal and state payroll taxes, which involves careful calculation, timely withholding, and accurate reporting to various government agencies. Here's an overview of what you should know.

Registering for payroll taxes

Before you can pay or withhold payroll taxes, your business needs to register at both the federal and state levels. Here's how:

1. Register for a Federal Employer Identification Number (EIN): Start by applying for a Federal Employer Identification Number (EIN) through the IRS. This number is required for reporting federal payroll taxes, including Social Security, Medicare, and federal income tax withholding.
2. Register your business with the state: Next, register your business with the New Jersey Division of Revenue and Enterprise Services. Once you register, the state gives you a New Jersey Employer Registration Number.
3. Set up your employer accounts: After you register, your info is sent to the New Jersey Department of Labor and Workforce Development (NJDOL). They'll open your employer accounts and assign your unemployment and disability insurance rates. If you're a brand-new employer, you'll get a default rate at first.
4. Register for any local payroll taxes: Some cities and counties in New Jersey have their own payroll taxes. Check with your city's finance office to find out if you need to register and file at the local level.

Calculating payroll taxes

Accurate payroll tax calculations keep things running smoothly. Even small mistakes can lead to problems like delaying employee benefits, creating extra paperwork, and triggering state audits. Here's how to calculate payroll taxes, step by step:

• Government websites: Register with the New Jersey Department of Labor and Workforce Development’s Employer Access portal to view your unemployment insurance (UI), temporary disability (TDI), and family leave (FLI) contribution rates. New Jersey also provides income tax withholding instructions each year to help you figure out how much to withhold and contribute. 
• Payroll software: Some small business software payroll programs have built-in New Jersey tax tables that automate calculations, saving you time and minimizing the chance for errors.
• Professional services: If you prefer to outsource payroll, a professional payroll service can handle everything for you.

Whichever method you choose, make sure you stay updated on the current tax rates and wage limits, as these can change every year.

Withholding state payroll taxes

Once you've calculated the appropriate taxes for each payroll, you then must withhold the correct amounts from your employees' paychecks and set aside the amounts you owe as an employer. In New Jersey, this includes several components at the state level. 

New Jersey Income Tax Withholding: This is the regular state income tax you take out of your employees' wages every payday. Use the state's withholding tables to figure out how much to withhold based on gross wages.

• Example: You have an employee who earns $1,500 every two weeks. After running the numbers using the official state method, you might have to withhold around $50 from that paycheck for state income tax. You'll send this amount to the New Jersey Division of Taxation, either quarterly or more often, depending on how much you owe in total.

Unemployment Insurance (UI) and Workforce Fund: New Jersey employees help fund the state's unemployment system through payroll deductions. Employees contribute 0.425% of their wages (comprised of 0.3825% for UI and 0.0425% for the Workforce Fund)—but only on wages up to $43,300.

• Example: If someone earns $800 for the week, you'll withhold $3.40 from their paycheck. These amounts add up over the year but won't exceed around $184 for employees who earn at or above the wage limit. You report and pay these amounts using the NJ-927 quarterly form. (You, the employer, also pay into UI—but your portion comes out of your own pocket, not the employee's pay.)

Temporary Disability Insurance (TDI): Employees also contribute to New Jersey's disability insurance program through payroll deductions. The TDI rate is 0.23% on wages up to a $165,400 wage cap.

• Example: On an $800 paycheck, that works out to a $1.84 deduction. You continue withholding TDI each pay period until the employee reaches the yearly cap. After that, you stop. This also goes on your NJ-927 quarterly report. (Note: If your company has a private disability plan approved by the state, the rules might be a little different, but most small businesses stick with the state plan.

Family Leave Insurance (FLI): This tax is similar to TDI. New Jersey employees also contribute to the state's Family Leave Insurance program. The 2025 rate is 0.33% of wages, up to a wage cap of $165,400.

• Example: On an $800 paycheck, you'd withhold $2.64 for FLI. Once an employee reaches the wage cap for the year, you stop taking out FLI. You'll report and remit FLI with your other state payroll taxes on the quarterly filing.

By applying these calculations to each paycheck, you ensure accurate withholdings and compliance with state requirements.

Remitting state payroll taxes

New Jersey requires employers to withhold state income tax from employees' wages and regularly remit those taxes to the state.

Filing payroll tax returns in New Jersey

In New Jersey, employers have to file both quarterly and annual payroll tax returns to report what they've paid their employees and what taxes were withheld. Even if you didn't pay any wages in a quarter, you still need to file a “zero return” to stay compliant and avoid penalties.

Quarterly requirements