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Taxation of Employee Benefits: New Jersey

Taxation of Employee Benefits requirements for other states

Federal law and guidance on this subject should be reviewed together with this section.

Author: Vicki M. Lambert, The Payroll Advisor

Summary

  • Because New Jersey allows only a limited exclusion for certain types of cafeteria plans, the value of cafeteria plan benefits is typically subject to state income tax withholding. The state income tax treatment of contributions to a qualified § 401(k) plan made through a cafeteria plan follows federal law. See Salary Deferrals to § 125 Cafeteria Plans and § 401(k) Plans.
  • Same-sex marriage is legal in New Jersey. Based on the US Supreme Court ruling in Obergefell v. Hodges, the value of health insurance benefits provided to an employee's same-sex spouse is not subject to state income tax withholding. New Jersey also recognizes civil unions and domestic partnerships, and the value of health insurance benefits provided to an employee's same-sex civil union partner or domestic partner is not taxable. See Same-Sex Couple Health Insurance Benefits.