Unemployment Benefits

• If you lose your job during the tax year and receive unemployment benefits from your state, New Jersey exempts all of this income from tax. Therefore, if you must file a New Jersey income tax return, you should omit all unemployment benefits. Moreover, the state only requires you to file a tax return when your total income that isn't tax-exempt exceeds certain thresholds. Therefore, you should also exclude your unemployment income for determining whether you even need to file a New Jersey tax return.
  
  

Certain Lottery Winnings

• Like many states across the country, New Jersey operates a lottery to provide additional sources of revenue. However, unlike the federal government, which requires you to report all lottery and gambling winnings as taxable income, up to $10,000 of annual winnings from playing the New Jersey lottery is tax-exempt. Be aware, though, that New Jersey will tax your winnings from lottery tickets you purchase in other states.
  
  

NJ Municipal Bonds

• States commonly borrow money from the general public by issuing municipal bonds that you can purchase as an investment. When you purchase a municipal bond, you are essentially lending the government money over a fixed period of time in exchange for periodic interest payments and a return of your initial investment at the end. If you purchase municipal bonds that are issued by a branch of the New Jersey state government, you can exclude all interest income you receive from your New Jersey taxable income. Also noteworthy is that the state allows you to exclude the interest you earn on U.S. Savings Bonds and Treasury Bills. Although these interest payments are not taxable, the state requires you to report the amount of tax-exempt interest you earn during the year.
  
  

Child Support Payments

• If you separate from your spouse or get a divorce, but retain custody of your children, the noncustodial spouse may provide you with child support payments. New Jersey never requires you to report this as taxable income on your tax return since the paying spouse usually makes the payments with after-tax funds. But in the event your former spouse uses tax-exempt money to make child support payments, it's still not taxable. One thing to be aware of is that New Jersey doesn't treat the alimony you receive in the same way. In fact, you must report all alimony payments as taxable income on your return. If you receive both types of payments, you need to insure that you don't misclassify any of it.