20 Nov Do I need to have taxes withdrawn from my pension?

Q. For tax year 2018 I had only $35,000 of pension income and taxes were withheld. Because I qualify for the pension exclusion, I don’t owe any state taxes. But do I have to have taxes deducted from my monthly benefit?
— Retired

A. We’ve got good news for you.

If you have no income for 2019 aside from the $35,000 of pension income, you will not incur any New Jersey gross income tax.

The pension exclusion will allow you, as a single person, to exclude up to $60,000 of income, said Neil Becourtney, a certified public accountant and tax partner with CohnReznick in Holmdel.

He said the requirements for claiming the pension exclusion are that you are either over age 62 or disabled and your total income does not exceed $100,000.

The pension exclusion for a single taxpayer increases to $75,000 for tax year 2020 and beyond, he said.

“Since you will not incur any New Jersey gross income tax, there is no reason for you to have any New Jersey income tax withheld from your pension income,” he said. “Withholding on retirement plan distribution income, whether from an IRA, Keogh plan, 401(k) plan, Simplified Employer Pension (SEP), defined benefit plan, profit-sharing plan, etc., is entirely optional for New Jersey as well as federal purposes.”

For those of you who are married, you can exclude up to $80,000 this year and in 2020, it will go up to $100,000.

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This story was originally published on Nov. 20, 2019.

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