New Jersey Self-Employed — NJ-1040, Schedule NJ-BUS-1 & Estimated Tax

Establish full-year NJ residency status and identify all income sources. NJ taxes residents on worldwide income using its own 18-category gross income definition (N.J.S.A. 54A:5-1) — not federal AGI — so the first step is confirming the taxpayer qualifies as a full-year resident and identifying every NJ income category that applies. Part-year or nonresident situations require Form NJ-1040NR, which is out of scope.

Compute net profits from business for NJ purposes. NJ starts from the federal Schedule C figure but requires several critical adjustments: self-employed health insurance premiums are NOT deductible for NJ (unlike federally), self-employed retirement contributions (SEP, SIMPLE, Keogh) are NOT deductible from NJ gross income, and employee 401(k)/403(b) contributions are fully taxable for NJ even though excluded federally. Depreciation generally conforms to federal MACRS, but verify any Section 179 or bonus depreciation differences under current NJ conformity.

Aggregate all NJ income categories and apply the limited NJ deductions. Unlike the federal return, NJ has NO standard deduction — only personal exemptions ($1,000 taxpayer, $1,000 spouse, $1,500 per dependent, plus additional $1,000 for age 65+ or blind). NJ deductions are narrow: medical expenses exceeding 2% of NJ Gross Income, and property taxes paid on a principal NJ residence up to $15,000 (or a property tax credit for taxpayers with NJ GI at or below $150,000). Social Security benefits are fully exempt; capital gains are taxed as ordinary income at NJ rates (no preferential rate).

Apply the graduated NJ Gross Income Tax rate schedule (1.4% to 10.75% for TY 2025) to arrive at NJ tax, then apply available credits. Key credits for self-employed taxpayers include: the NJ Property Tax Credit (if NJ GI ≤ $150,000), the NJ Earned Income Tax Credit (39% of the federal EITC for TY 2025), excess UI/SDI/FLI withholding credit, and — if the taxpayer is a member of a pass-through that elected BAIT — the Schedule NJ-BUS-2 refundable BAIT credit. Capital gains receive no preferential rate; the NJ return does not allow a deduction for the federal self-employment tax (SE tax is purely federal).

NJ requires quarterly estimated tax payments when expected GIT liability after withholding is $400 or more (N.J.S.A. 54A:9-6). Self-employed taxpayers with no wage withholding almost always trigger this requirement. Payments are due April 15, June 15, September 15, and January 15 (following year) on Form NJ-1040-ES. For TY 2025 returns filed in 2026, also project 2026 quarterly vouchers based on 2025 liability or the prior-year safe harbor, and flag whether the BAIT election at the entity level (PTE-150 vouchers) affects the individual's obligation.

Perform final cross-checks and assemble the complete NJ-1040 package for filing. Key NJ-specific review points: confirm NJ Gross Income was built from NJ categories (not copied from federal AGI), verify that SE health insurance and retirement contribution add-backs are correct, confirm property tax deduction or credit election, and check that no standard deduction was claimed (NJ has none). Extension via Form NJ-630 (or federal extension) is available to October 15, 2026, but any balance due must be paid by April 15, 2026 to avoid interest.