Did you notice NJ take a bigger bite of your recent paycheck? Payroll taxes are up

If you think you noticed a smaller paycheck starting in 2025, you’re not imagining things. 

State officials rolled out a series of tax increases that hit New Jersey residents' paychecks in January, which are meant to boost New Jersey’s cash-strapped temporary disability and family leave insurance funds. 

The fund faces a shortfall of $442 million by June 30, which is the end of the state’s current fiscal year, Labor Commissioner Robert Asaro-Angelo said during a legislative budget hearing last April. 

New Jersey’s temporary disability fund is paid for with contributions from both the employee and employer, while employees alone are on the hook for payments into the state’s family leave insurance program.

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Asaro-Angelo pointed to a “perfect storm” that caused the increases, namely because of the 2019 expansion of the paid family leave law. Moreover, the family leave and temporary disability insurance funds were heavily used during the COVID-19 pandemic, draining many of the funds, Asaro-Angelo said. 

The hope is that with more people returning to work and the higher taxes, that fund will be replenished, Asaro-Angelo said last year. 

“All this is set by statute,” Asaro-Angelo told lawmakers last April. “We don’t have flexibility in setting the rates. Whatever the statute says we’re going to do, we’re going to do.”

What are the 2025 rates?

Employees previously not subject to the disability insurance tax will now see paycheck deductions of 0.23%, said Shubham Shah, manager at the Cranford accounting firm PKF O’Connor Davies. The tax will be levied on anyone making more than $165,400 a year, $4,000 above the base in 2024. 

“Higher earners, making $165,400 or above, can expect to pay a new maximum tax of $380.42,” Shah said in an emailed statement. 

Meanwhile, the tax rate for family leave insurance increased from 0.09% to 0.33%, and the most employees could pay would increase to $545.82 in 2025, up from $145.26 last year, Shah said. 

As with temporary disability insurance, the family leave tax will now also be levied on anyone making more than $165,400 a year. 

“While the adjustments for 2025 aren’t drastic, the base wage and tax rate for each of these programs may change annually,” Shah said.

Daniel Munoz covers business, consumer affairs, labor and the economy for NorthJersey.com and The Record. 

Email: munozd@northjersey.com; Twitter:@danielmunoz100 and Facebook