Will I lose pension exclusion because of Social Security raise?

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Q. I’m considering moving from Florida to New Jersey and want to know if I will be charged New Jersey taxes on my pension and Social Security. I am 63 years old and file my taxes as single. My city government pension is $76,688 per year and my Social Security is $23,232, bringing my annual total to $99,920. I have 10% tax voluntarily taken out of each Social Security check. I just received a slight raise in my Social Security this year and I’m concerned about what happens if my income goes over the $100,000 cutoff figure.
— Retired

A. If you move to New Jersey, you have nothing to worry about in terms of personal income taxes.

While as much as 85% of Social Security benefits can be subject to federal tax, New Jersey, like most states, does not tax them, said Neil Becourtney, a certified public accountant and tax partner with CohnReznick in Holmdel.

You appear to be aware of the $100,000 New Jersey gross income threshold for purposes of claiming the pension exclusion, which for a single taxpayer is $75,000 for 2020.

If income exceeds $100,000, then the taxpayer loses the entire pension exclusion, Becourtney said.

Because your Social Security benefits are not taxable, your gross income for purposes of the pension exclusion will only be your $76,688 yearly pension income.

“Since you have attained the age of 62, you will be entitled to claim a $75,000 pension exclusion in 2020 and future years, absent any future law change,” he said. “You will likely end up with zero New Jersey tax after claiming a medical deduction for unreimbursed medical expenses in excess of 2% of your New Jersey gross income ($1,534) against your remaining $1,688 of New Jersey taxable income.”

While that’s good news, it’s not the only tax to consider.

Keep in mind that you may encounter other taxes in New Jersey that are higher than Florida’s, such as real estate taxes.

But at least for personal income taxes, nothing should change because of your move, he said.

Welcome to the Garden State.

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This story was originally published on March 11, 2020.

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