26 Mar When I retire, will taxes be better in N.Y. or N.J.?
Q. I’m retiring soon at 55. I live in New Jersey, my pension is from New York City at $83,000 a year. My wife works in New Jersey for a private company earning $110,000. She plans to work for 10 more years. I know New York State won’t tax my pension and that New Jersey has a pension exclusion at age 62. Should I move to New York or stay in New Jersey?
— Living the dream
A. It’s brave of you to consider retirement in the wake of how coronavirus slumped the stock market.
In most cases, you should never move to a state just for the tax savings — though many people choose Florida where in addition to no taxes, you get warm weather all year round.
New Jersey does indeed also allow you to exclude a certain amount of your pension income but only if your gross taxable New Jersey income is below a threshold, said Howard Hook, a certified financial planner and certified public accountant with EKS Associates in Princeton.
For tax year 2019, you could exclude up to $80,000 of pension income and in 2020 you can exclude $100,000, but only if your gross income for New Jersey purposes is $100,000 or less, Hook said.
Your pension does count as part of the gross income calculation for determining if you qualify, Hook said.
“Assuming that your wife will still be working when you turn 62, you will not qualify for the pension exclusion,” Hook said. “When she retires three years after that, you may qualify as long as your other New Jersey taxable income does not exceed $17,000 — the amount you would need to stay below to keep to the $100,00 income limit.”
Of course, tax laws could change quite a bit over the next ten years, so take more than taxes into your decision.
Email your questions to moc.p1586094736leHye1586094736noMJN1586094736@ksA1586094736.
This story was originally published on March 26, 2020.
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