New Jersey · Student Loan Interest Deduction
Student Loan Interest Deduction in New Jersey (2026)
Deduct up to $2,500 of student loan interest paid during the tax year. New Jersey has a progressive income tax with a top rate of 10.75%, so a New Jersey filer's combined marginal rate on the next dollar at $93,851 of income is about 28.37% (22% federal + 6.37% NJ).
2026 savings example for New Jersey
Planning estimate for a single filer earning $93,851 (New Jersey median household income in LevyIO's state dataset) who removes $2,500 from taxable income. Federal tax uses the 2026 IRS brackets after the $16,100 standard deduction; NJ tax uses the state brackets in LevyIO's dataset and assumes the state follows the federal treatment.
Estimated total savings
$709
Federal savings
$550
$11,817 → $11,267 · 22% bracket
NJ state savings
$159
$3,852 → $3,693 · 6.37% marginal
Combined marginal rate
28.37%
≈ $284 saved per $1,000 deducted
Statutory maximum for this item in LevyIO's dataset: $2,500.
Federal × New Jersey marginal rates (2026, single)
Gross-income ranges include the federal standard deduction. The NJ column is the state marginal rate at the midpoint of each range. The last column is the tax saved per $1,000 deducted at that combined rate.
| Federal bracket | Gross income (single) | NJ marginal | Combined | Per $1,000 |
|---|---|---|---|---|
| 10% | $16,100 - $28,500 | 1.75% | 11.75% | $118 |
| 12% | $28,500 - $66,500 | 5.53% | 17.52% | $175 |
| 22% | $66,500 - $121,800 | 6.37% | 28.37% | $284 |
| 24% | $121,800 - $217,875 | 6.37% | 30.37% | $304 |
| 32% | $217,875 - $272,325 | 6.37% | 38.37% | $384 |
| 35% | $272,325 - $656,700 | 6.37% | 41.37% | $414 |
| 37% | Over $656,700 | 8.97% | 45.97% | $460 |
Eligibility & forms
Individuals paying student loan interest with income under $90K single/$185K married
- Must be legally obligated
- For qualified education expenses
- Income phase-outs apply
Federal forms: Form 1098-E, Form 1040
New Jersey filing notes
No standard deduction. Property taxes average over $9,000 annually for many homeowners, so ANCHOR, Senior Freeze, and Stay NJ property tax relief can matter more than small income tax changes. Social Security is not taxed by New Jersey, and retirement income exclusions may apply if income is below state thresholds.
Common mistakes: Exceeding income limits; Deducting parent PLUS loan interest on student's return.
Frequently asked questions
How much can the Student Loan Interest Deduction save a New Jersey taxpayer in 2026?
In LevyIO's example, a single filer with $93,851 of income (the New Jersey median household income in our state dataset) who removes $2,500 from taxable income saves about $550 in 2026 federal tax (22% marginal bracket) plus about $159 in New Jersey tax (6.37% state marginal rate), roughly $709 combined. It is a planning estimate computed from the 2026 IRS brackets and LevyIO's NJ bracket data, not a survey figure.
What is the New Jersey income tax rate for 2026?
New Jersey has a progressive income tax with a top rate of 10.75%. The NJ standard deduction in LevyIO's dataset is $0 single / $0 married. Highest property taxes (2.23%). Top rate 10.75%. Inheritance tax still applies to some beneficiaries, but the state estate tax no longer applies to recent deaths. No standard deduction.
Who qualifies for the Student Loan Interest Deduction in New Jersey?
Individuals paying student loan interest with income under $90K single/$185K married. The federal rules are the same in every state; the requirements are: Must be legally obligated; For qualified education expenses; Income phase-outs apply. New Jersey filers should confirm on the NJ return whether the state follows the federal treatment.
Which forms do I file to claim the Student Loan Interest Deduction?
Federal: Form 1098-E, Form 1040. New Jersey: check the New Jersey Division of Taxation instructions for the matching state schedule. Common mistakes: Exceeding income limits; Deducting parent PLUS loan interest on student's return.
Student Loan Interest Deduction in other states
Sources
Reviewed 2026-09-17. Estimates are educational planning figures computed from the IRS 2026 inflation adjustments and LevyIO's state bracket dataset; they are not tax advice.