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New Jersey taxes for delivery and rideshare drivers (2026)
New Jersey taxes the profit from your gig driving at graduated rates from 1.4% to 10.75%, and it builds that profit from your Schedule C instead of your federal adjusted gross income. That one design choice explains most of what surprises drivers here: New Jersey does not follow the federal tips deduction, does not let you subtract half of your self-employment tax, and does not let a driving loss reduce tax on a W-2 job.
The federal side of your bill is covered by our 1099 gig tax calculator. This page explains the New Jersey layer and shows it on one driver, with every number produced by the same engine.
Key numbers
| Item | What applies |
|---|---|
| Income tax | Yes. Seven rates from 1.4% to 10.75% for a single filer (2026 NJ-1040-ES schedule) |
| Starting point | Your own Schedule C profit (Schedule NJ-BUS-1), not federal AGI |
| Standard deduction | None. A $1,000 personal exemption instead |
| Half of self-employment tax | Not deductible |
| Federal tips deduction | Not followed (Division of Taxation, tax years 2025 to 2028) |
| Filing threshold | $10,000 gross income single, $20,000 joint or head of household |
| Estimated payments | Required if you expect to owe more than $400; Form NJ-1040-ES or online |
| Business loss | Cannot offset wages; see Schedule NJ-BUS-2 |
Why New Jersey ignores your federal AGI
Most states with an income tax begin with the adjusted gross income on your federal return and then add or subtract. New Jersey's gross income tax does not. The Division of Taxation describes it as a tax with defined categories of income and deductions, and the NJ-1040 asks you to fill each category in yourself. For a driver, the category that matters is "net profits from business." You complete Schedule NJ-BUS-1 starting from your federal Schedule C, make a short list of New Jersey adjustments, and carry the result to the return.
Three federal items fall away in the process, because they are taken after Schedule C on the federal return:
- The deductible half of self-employment tax. It lowers federal AGI, but there is no New Jersey line for it.
- The tips deduction. It is a federal deduction below AGI, so New Jersey never sees it.
- The qualified business income deduction. It is not among the deductions New Jersey lists.
What stays is everything inside Schedule C, including your mileage. If you use the standard mileage rate federally, the same expense is part of the profit New Jersey starts from, so a careful mileage log lowers both bills at once. In place of a standard deduction, a single filer subtracts a $1,000 personal exemption.
The 2026 rate schedule
The 2026 Form NJ-1040-ES prints these single-filer bands for this year's estimates. They are the same as on the 2025 NJ-1040. Joint filers and heads of household use a separate table with wider bands and an extra 2.45% step.
| Taxable income (single) | Rate on that slice |
|---|---|
| Up to $20,000 | 1.4% |
| $20,000 to $35,000 | 1.75% |
| $35,000 to $40,000 | 3.5% |
| $40,000 to $75,000 | 5.525% |
| $75,000 to $500,000 | 6.37% |
| $500,000 to $1,000,000 | 8.97% |
| Over $1,000,000 | 10.75% |
The Division's own table uses a "multiply, then subtract" format; the result is the same as taxing each slice at its rate.
Worked example: one full-time driver, two tax bases
A single driver in New Jersey grosses $47,000, of which $5,200 is tips reported on the app's 1099. The driver logs 6,000 business miles from January to June and 6,400 from July to December, and spends $900 on phone, bags, and other supplies. Here is how the engine moves from those inputs to two different tax bases.
| Step | Federal | New Jersey |
|---|---|---|
| Schedule C net profit | $36,886.00 | $36,886.00 |
| Half of self-employment tax | −$2,605.91 | Not allowed |
| Adjusted gross income / NJ gross income | $34,280.09 | $36,886.00 |
| Standard deduction or exemption | −$16,100 | −$1,000 |
| Tips deduction | −$5,200 | Not allowed |
| Income tax | $1,038.41 | $573.51 |
New Jersey taxable income is $35,886, which reaches the 3.5% band. The state tax of $573.51 works out to 1.67% of federal AGI, the rate the engine adds to the federal result. With self-employment tax of $5,211.83, the driver's total for the year is $6,823.74, or 14.5% of gross income to set aside.
The federal income tax line already reflects the qualified business income deduction, which New Jersey does not have. Before any New Jersey credits, the state bill is small next to self-employment tax, which is the largest single item at this income.
What your tips cost on the New Jersey return
Because New Jersey taxes tips as ordinary business profit, the $5,200 of tips in the example adds $106.51 of state tax. That is the difference between the tax on $35,886 and the tax on the same income without the tips. The federal deduction removes those tips from federal taxable income, but the Division of Taxation has said plainly that the federal tips, overtime, and senior deductions do not affect the NJ-1040 for 2025 through 2028.
Our tips calculator prices the federal side. When it asks whether your state follows the deduction, answer no for New Jersey.
Estimated payments: the $400 test
The 2026 NJ-1040-ES instructions say you are required to make estimated payments if you expect to owe more than $400. The dates match the federal ones: April 15, June 15, and September 15, 2026, and January 15, 2027. You can pay by e-check or card on the Division's website or mail a voucher. For the driver above, four equal payments would be about $143.38 each.
Two details are specific to New Jersey. First, the January installment can be skipped if you file your 2026 return by February 15, 2027 and pay the whole balance. Second, the cost of paying too little is interest, not a fixed penalty: the NJ-1040 instructions say installment interest may be charged if you owe more than $400 and paid less than 80% of your tax during the year, and the NJ-1040-ES instructions set that interest at the prime rate plus 3%. For the federal payments, see our quarterly payment how-to.
Losses, depreciation, and the car
A part-time driver with a big repair bill can end the year with a Schedule C loss. On the federal return, that loss reduces other income. In New Jersey, the instructions for line 18 say to make no entry if the business result is a loss, so it cannot offset wages from another job. Schedule NJ-BUS-2 may give a partial adjustment and lets unused losses carry forward for up to 20 years.
If you use actual car expenses instead of the mileage rate and claim bonus depreciation or a section 179 deduction federally, New Jersey requires a depreciation adjustment on Worksheet GIT-DEP, because the state's depreciation limits differ. Drivers who use the standard mileage rate do not run into this.
Credits a New Jersey driver should check
New Jersey's earned income tax credit is 40% of the federal earned income credit, according to the 2025 NJ-1040 instructions. A driver whose net profit is modest after mileage can qualify federally, and the state credit follows. Self-employed health insurance is also usable here: New Jersey lets you include it in the medical expense deduction on Worksheet F, even though the half-SE adjustment does not carry over.
General information for tax year 2026, not tax advice. We checked the sources below on October 11, 2026.
For a neighbor that now follows the tips deduction, see the New York guide; for a flat-rate neighbor that also skips the standard deduction, see the Pennsylvania guide.
Frequently asked questions
Does New Jersey tax my delivery and rideshare tips?
Yes. The Division of Taxation says the federal deductions for tips, overtime, and seniors created by the One Big Beautiful Bill Act do not affect the NJ-1040, because the New Jersey gross income tax has its own categories of income and is not computed from federal adjusted gross income. Tips that you deduct on your federal Schedule 1-A stay inside your New Jersey business profit.
Can I deduct half of my self-employment tax on the New Jersey return?
No. The deductions New Jersey allows are listed on the NJ-1040 and on the 2026 NJ-1040-ES worksheet. They include exemptions, medical expenses over 2% of income including self-employed health insurance, alimony, conservation contributions, the Health Enterprise Zone deduction, the alternative business calculation, organ donation, and the college affordability deductions. The deductible half of self-employment tax is not among them, so New Jersey taxes the full Schedule C profit.
Do I have to make New Jersey estimated payments?
If you expect to owe more than $400 after withholding and credits, yes. The exception is income at or below the filing threshold: a single filer with gross income of $10,000 or less for the year ($20,000 for joint filers and heads of household) does not have to file or pay estimates.
My driving made a loss this year. Can it lower the New Jersey tax on my W-2 job?
Not directly. New Jersey taxes each category of income separately, and the NJ-1040 instructions say that if your net business result is a loss you make no entry on the business line. The loss may still count through Schedule NJ-BUS-2, the alternative business calculation, which can give an adjustment and lets unused losses carry forward for up to 20 years.
I live in New Jersey and drive in Pennsylvania. Does the reciprocal agreement cover me?
Probably not for driving income. The New Jersey and Pennsylvania reciprocal agreement covers compensation paid to employees. The NJ-1040 instructions say self-employment income is not covered, so if Pennsylvania taxes it you claim a credit for taxes paid to another jurisdiction on Schedule NJ-COJ. The agreement also does not apply to Philadelphia or other Pennsylvania local taxes.
Which New Jersey rates apply to 2026?
The 2026 Form NJ-1040-ES prints the rate schedule for 2026 estimates, and its single-filer bands match the 2025 NJ-1040: 1.4% on the first $20,000 rising to 10.75% above $1 million. Recheck when the 2026 NJ-1040 booklet is published.
Sources
- New Jersey Division of Taxation, One Big Beautiful Bill Act and the New Jersey Gross Income Tax (federal tips, overtime, and senior deductions do not affect NJ returns)
- Division of Taxation, 2026 Form NJ-1040-ES vouchers and 2026 NJ-1040-ES instructions (the $400 rule, filing thresholds, due dates, February 15 option, allowable deductions, 2026 rate schedule)
- Division of Taxation, 2025 NJ-1040 instructions (filing thresholds, $1,000 exemption, Schedule NJ-BUS-1 and line 18, NJ-BUS-2 carryforward, GIT-DEP, installment interest and the 80% test, NJ earned income tax credit, Pennsylvania reciprocal agreement and Schedule NJ-COJ, tax rate schedules)
- Division of Taxation, GIT-8, Estimating Income Taxes
- IRS, What the "No Tax on Tips" deduction means for you (federal deduction); federal figures from our methodology page