New Jersey Gross Income Tax law does not adopt the federal income tax treatment of
cafeteria plans as provided under I.R.C. Section 125. However, the New Jersey Gross Income Tax
law has a very limited exclusion for one particular type of cafeteria plan, not including any
salary-reduction plan. Since the New Jersey exclusion is limited, the value of cafeteria plan
benefits typically is includable in New Jersey taxable wages and subject to Gross Income
Tax withholding.
