30 Jan Earn too much? Goodbye pension exclusion
Q. If my pension income is less than $100,00, but my gross income is $100,001, I don’t qualify for the pension exclusion. How will anybody be able to deduct this if they have $100,000 of pension income and $1 in interest income? Why wasn’t it a graduated rate? This doesn’t seem fair.
— Taxed enough
A. Fair or not, those are the rules.
Lawmakers had to create a cutoff somewhere, and $100,000 was what they chose. And while they could have allowed the exclusion up to that amount for everyone – taxing only income over $100,000 – that’s not the way it went.
That kind of move would have made the exclusion way more expensive for the state’s coffers.
Income from Social Security, and interest from N.J. municipal bonds and federal government bonds are not included. Pretty much everything else will count as income for the exclusion.
There is no phase-out or graduated rate consideration, said Gail Rosen, a certified public accountant with Wilkin & Guttenplan in Martinsville.
Simply, if you earn more than $100,000, you lose the entire exclusion, she said.
For tax year 2018, up to $60,000 of income can be excluded if you’re married filing jointly. The amount is $30,000 if you’re married filing separately, and $45,000 for singles/heads of household, Rosen said.
It maxes out in 2020, when those married filing jointly can exclude $100,000 of income, married filing separately can exclude $50,000 and singles/heads of household can exclude $75,000.
But for each year, your income must be under $100,000 to qualify.
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