NJ Tax Changes 2025: Every Business Owner Needs to Know
- Gregory Monaco, CPA
- Dec 27, 2025
- 4 min read
NJ tax changes for 2025 include expanded taxable services, electric vehicle exemption phaseout, QSBS capital gains recognition, and Corporate Business Tax rate reductions. Business owners, investors, and high-net-worth individuals must understand these changes to remain compliant and capitalize on new planning opportunities.
Summary of Major 2025 NJ Tax Changes
New Taxable Services: Digital streaming and interior design services now subject to 6.625% sales tax
EV Sales Tax Exemption Phaseout: Full exemption ends July 2025
Mansion Tax Increase: Higher rates on high-value home sales
QSBS Recognition: NJ now recognizes federal Qualified Small Business Stock capital gains exclusion
CBT Rate Reduction: Gradual reduction for C-Corporations through 2027
BAIT Continues: Pass-through entity tax remains available for SALT cap workaround
Property Tax Relief: Stay NJ program launching 2026; ANCHOR continues for 2025
2025 NJ Income Tax Brackets
New Jersey's progressive income tax system features rates from 1.4% to 10.75%, with the top rate applying to income exceeding $1 million.
2025 NJ Income Tax Rates (Single Filers)
Taxable Income | Tax Rate |
$0 – $20,000 | 1.4% |
$20,001 – $35,000 | 1.75% |
$35,001 – $40,000 | 3.5% |
$40,001 – $75,000 | 5.525% |
$75,001 – $500,000 | 6.37% |
$500,001 – $1,000,000 | 8.97% |
Over $1,000,000 | 10.75% |
1. New Taxable Services: Digital Streaming and Interior Design
New Jersey has expanded its sales tax base to include services previously exempt. Digital streaming subscriptions and interior design services are now subject to the 6.625% state sales tax.
What This Means for Businesses
Streaming service providers must collect NJ sales tax from NJ customers
Interior designers must register for and collect sales tax
Businesses purchasing these services will see higher costs
What This Means for Consumers
Netflix, Spotify, and similar subscriptions now include NJ sales tax
Interior design services cost 6.625% more
2. Electric Vehicle Sales Tax Exemption Phaseout
The NJ sales tax exemption for zero-emission vehicles phases out completely by July 2025. Buyers should plan purchases accordingly to maximize savings.
EV Exemption Phaseout Schedule
Period | Exemption |
Through June 30, 2024 | Full exemption |
July 1, 2024 – June 30, 2025 | Partial exemption |
After July 1, 2025 | No exemption (full 6.625% tax) |
3. Mansion Tax Rate Increase
New Jersey increased its mansion tax on high-value property transactions. The realty transfer fee now includes higher rates for properties sold above $1 million.
Mansion Tax Rates
Sale Price | Additional Tax Rate |
Over $1,000,000 | 1% on amount over $1M |
4. QSBS Capital Gains Exclusion Now Recognized
New Jersey now recognizes the federal Qualified Small Business Stock (QSBS) capital gains exclusion. This is a major change that can save startup investors up to 10.75% on qualifying gains.
QSBS Qualification Requirements
Stock acquired at original issuance (not secondary market)
Issued by a C-Corporation with assets under $50 million
Held for at least 5 years
Company actively engaged in qualified business
Exclusion Amounts
Federal: Up to 100% exclusion (for stock acquired after 2010)
NJ: Now follows federal treatment
Maximum exclusion: Greater of $10 million or 10x basis
5. Corporate Business Tax Rate Reduction
New Jersey is gradually reducing its Corporate Business Tax (CBT) rates for C-Corporations.
CBT Rate Reduction Schedule
Tax Year | CBT Rate (Income Over $1M) |
2024 | 9.0% |
2025 | Continuing reduction |
2027+ | Target rate |
The minimum CBT still applies based on NJ gross receipts, ranging from $500 to $2,000.
6. Pass-Through Business Alternative Income Tax (BAIT)
BAIT remains available as a SALT cap workaround for S-Corps, partnerships, and multi-member LLCs. This entity-level tax election provides federal tax savings by converting non-deductible SALT into a deductible business expense.
2025 BAIT Tax Rates
Distributive Proceeds | BAIT Rate |
$0 – $250,000 | 5.675% |
$250,001 – $1,000,000 | 6.52% |
Over $1,000,000 | 10.9% |
Election deadline: March 15 for calendar-year entities
7. Property Tax Relief Programs
ANCHOR Program (2025)
The ANCHOR program continues providing property tax relief to NJ homeowners and renters based on income levels.
Stay NJ Program (Launching 2026)
The Stay NJ program will provide additional property tax relief for seniors beginning in 2026.
8. Worker Classification Enforcement
New Jersey continues strict enforcement of the ABC Test for determining independent contractor vs. employee status. Misclassification carries significant penalties including back taxes, penalties, and interest.
ABC Test Requirements
A worker is an employee unless all three conditions are met:
A: Free from control or direction in performing the work
B: Work performed outside the usual course of the hiring entity's business
C: Worker is customarily engaged in an independently established trade
2025 Action Items Checklist
January – March
Evaluate BAIT election (deadline March 15 for calendar-year entities)
Review worker classifications for compliance
Confirm NJ S-Corp election is on file if applicable
Make Q4 2024 estimated payments (due January 15)
Throughout the Year
Collect sales tax on newly taxable services
Track EV purchases before July for partial exemption
Document QSBS holdings and holding periods
Plan property transactions with mansion tax in mind
Year-End
Review income timing opportunities
Maximize retirement contributions
Apply for ANCHOR benefit when open
Schedule tax planning session with CPA
How Monaco CPA Helps with NJ Tax Changes
Monaco CPA helps Essex County businesses understand how changes affect them specifically, plan proactively to minimize tax burden, stay compliant with new requirements, and capitalize on opportunities like QSBS and BAIT.
Phone: (862) 320-9554
Email: greg@monacocpa.cpa
Gregory Monaco, CPA, MBA — Livingston, NJ | Serving Essex County and all of New Jersey
Frequently Asked Questions
When do most of these changes take effect?
Most took effect in late 2024 and apply fully in 2025. The EV exemption phases out completely in July 2025. CBT rates continue decreasing through 2027.
Do I need to do anything different for sales tax on streaming services?
If you're a consumer, you'll see higher bills. If you're a provider, you must collect NJ sales tax on charges to NJ customers.
How does the QSBS change affect my startup investment?
If your investment qualifies under federal QSBS rules, you can now exclude those gains from NJ tax. This could save up to 10.75% of your gain compared to prior years.
Is the mansion tax paid by buyer or seller?
The mansion tax is typically the buyer's responsibility, though it's often negotiated as part of the transaction.
Will there be more changes in 2026?
Yes. The Stay NJ program launches, CBT rates decrease further, and other adjustments are expected.
Last updated: December 2025. This guide covers major changes and is not exhaustive. Consult with a qualified CPA for advice specific to your situation.
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