New Jersey will not adopt the OBBBA’s new federal deductions for Gross Income Tax, but it conforms to federal changes for charitable contribution deductions only to the extent consistent with the Corporation Business Tax Act.
New Jersey’s Division of Taxation has clarified that it will not adopt the new federal deductions introduced by the “One Big Beautiful Bill Act” (OBBBA) for Gross Income Tax (GIT) purposes. The state also clarified that the OBBBA’s changes to charitable deductions align with the state’s corporation business tax (CBT) and do not affect GIT.
On 1 December 2025, New Jersey’s Division of Taxation clarified that for tax years 2025 through 2028, under the One Big Beautiful Bill Act (OBBBA), there are new federal income tax deductions for senior citizens, overtime, and tips. However, the New Jersey GIT has defined categories of income and deductions and is not computed based on federal adjusted gross income. Therefore, federal deductions under the federal OBBBA regarding overtime, tips, and senior citizens do not affect a taxpayer’s New Jersey Individual Income Tax return (Form NJ-1040, NJ-1040NR, or NJ-1041).
The Taxation Division, in separate guidance issued the same day, addressed whether New Jersey aligns with federal changes to charitable contribution deductions, provided they are consistent with the CBT.
The Division clarified for purposes of the New Jersey Corporation Business Tax Act, the starting point for taxable income is the entire net income before net operating losses and special deductions, with specific statutory adjustments for additions and deductions. (See N.J.S.A. 54:10A-4; N.J.A.C. 18:7-3.12.) Under the One Big Beautiful Bill Act, the federal changes to charitable contribution deductions affect the total deductions that are above the entire net income before net operating losses and special deductions.
Accordingly, New Jersey conforms to the federal changes for charitable contribution deduction to the extent they are consistent with the New Jersey Corporation Business Tax Act. For the purposes of the New Jersey Gross Income Tax Act, there is no provision similar to the Federal Internal Revenue Code allowing charitable deductions. Therefore, there are no changes for Gross Income Tax purposes.
New Jersey law provides several gross Income Tax deductions that can be taken on the New Jersey Income Tax return. New Jersey does not allow federal deductions, such as mortgage interest, employee business expenses, and IRA and Keogh Plan contributions. Full-year residents can only deduct amounts paid during the tax year. Part-year residents can only deduct those amounts paid while they were New Jersey residents.
