Q. I am a retired New Jersey police officer. My wife and I have combined salaries of more than $120,000. Can we file separately so I can get the exclusion?
A. There are lots of strategies taxpayers use to minimize what they must pay, but you’re out of luck here.
Current New Jersey law takes into account your filing status — the state doesn’t want to lose out on the revenue.
For 2017, the exclusion limit for a married couple is $40,000, said Matthew Masterson, a certified financial planner with RegentAtlantic in Morristown. The exclusion is $30,000 for single filers, but only $20,000 for those married filing separately.
“As you can see, New Jersey provides only 50 percent of the exclusion to a separate filer compared to that of a joint filer, so filing separate would not have an impact,” he said.
The retirement and pension exclusion is available to those 62 or older, but it has a “cliff,” meaning that it is an all or nothing scenario. For instance, Masterson said, if you are a joint filer in 2017 and your gross income is $100,001, you receive no exclusion.
The limits for the exclusion will keep rising each year until it reaches $100,000 in 2020 for married filers.
“The idea of increasing the pension and retirement exclusion limit is to entice folks to stay in New Jersey in retirement rather than moving to more tax-friendly states, though the exclusion is limited due to the fact that it is a cliff and the final limits in 2020 are not scheduled to be indexed for inflation,” Masterson said.
Email your questions to moc.p1532347137leHye1532347137noMJN1532347137@ksA1532347137.