The New Jersey Division of Taxation has updated its guidance for military families, effective January 1, 2025. These updates, outlined in Technical Bulletin No. GIT-7, provide clarity on tax issues affecting veterans and their families, including the veteran’s exemption, the wounded warrior’s caregivers credit, combat pay, and tax exemptions for military spouses. Martin D. Hauptman, Partner in our Tax, Trusts, and Estates practice groups, explains how these updates impact military families and their tax filings.
Veteran’s Exemption and Wounded Warrior’s Caregivers Credit
New Jersey offers a valuable Veteran’s Exemption, which helps reduce the taxable income of eligible veterans. The exemption applies to veterans who served in the military, but the eligibility requirements depend on factors such as the veteran’s service period, disability status, and whether the veteran has been honorably discharged. This exemption is available to both veterans living in New Jersey and those who may have relocated to the state after their military service.
To qualify for the Veteran’s Exemption, the veteran must meet certain residency and service conditions, including being a New Jersey resident at the time of filing or having been a resident at the time of their military service. Veterans with a disability rating from the U.S. Department of Veterans Affairs (VA) may also qualify for additional exemptions, further reducing their taxable income.
In addition to the Veteran’s Exemption, New Jersey offers a Wounded Warrior’s Caregivers Credit designed to assist those who provide care to veterans injured in service. This credit is available to individuals who serve as primary caregivers for veterans with permanent disabilities resulting from military service. This includes veterans who have suffered physical injuries or mental health conditions, such as post-traumatic stress disorder (PTSD), that require ongoing care and support.
Combat Pay
Combat pay is exempt from New Jersey state income tax, providing important financial relief to military personnel who serve in designated combat zones. The updated guidance from the New Jersey Division of Taxation reaffirms that any pay received by service members for their time spent in combat zones is not subject to New Jersey’s state income tax, just as it is exempt from federal income tax under the Internal Revenue Code. This exemption helps military families retain more of their earnings, particularly for those who have served in high-stress, high-risk environments; it’s important for military personnel to keep detailed records of their service and any combat-related pay to ensure they are correctly applying the exemption on their state tax filings.
Military Spouses: Exemption from Withholding
In addition to the tax benefits available to veterans, New Jersey also provides tax relief for military spouses who work in the state but live outside of New Jersey. This applies particularly to spouses of active-duty service members who have elected to be treated as nonresidents of New Jersey. This update helps alleviate the tax burden for military families who frequently relocate.
Next Steps for Military Families
Military families should review the updated guidance to ensure they are maximizing their available exemptions and credits. Consulting with a tax professional can help confirm eligibility and ensure accurate filing.
For more details, refer to New Jersey Division of Taxation Technical Bulletin No. GIT-7.
If you have any questions, you can reach Martin D. Hauptman at mhauptman@mblawfirm.com or 973-243-7912.