05 Feb I get a pension. Is it taxable in New Jersey?
Q. Are pensions taxable?
— Looking for savings
A. New Jersey has made some changes to the taxation of pensions and other retirement income in an attempt to encourage seniors to stay in the state for retirement.
More on that in a moment.
Depending on the plan and the elections you made within the plan, part or all may not be taxable, said Michael Karu, a certified public accountant with Levine, Jacobs & Co. in Livingston.
For example, many 401(k) plans offer Roth provisions, he said. If you opted for all or part of your contribution to be a Roth contribution, there will be some portion of the pension that would be free of tax.
But if your pension would normally be taxable, New Jersey does have a retirement income exclusion, commonly called the pension exclusion. This allows seniors who qualify to essentially have tax-free retirement income.
“The threshold changes depending on your tax filing status and your income,” Karu said.
For the 2019 tax year, a married couple filing jointly could exclude $80,000 of pension income from New Jersey income taxes long as their total income does not exceed $100,000.
For 2020, the same couple could exclude $100,000 from tax as long as they don’t earn more than $100,000.
You can see more about the thresholds here.
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This story was originally published o Feb. 5, 2020.
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