03 Apr If I move to N.J., will my pension be taxed?

Q. My wife and I are both retired New York City workers receiving pensions that are only taxed federally. We are both considering moving to New Jersey. I am 63 and she is 64. We both are waiting until 66 to collect the full Social Security monthly payment. My pension totals about $50,000 per year while hers totals $20,000. Will we be taxed on that income in New Jersey? And when we do apply for Social Security, that will give us another $50,000 collectively.
— Thinking about it

A. We’ve got good news for you in New Jersey.

First, let’s go over the eligibility for the New Jersey pension exclusion.

You’re eligible if you have less than $100,000 of gross income and be 62 or older or be eligible for Social Security benefits because of a disability, said Gerard Papetti, a certified financial planner and certified public accountant with U.S. Financial Services in Fairfield.

He said for 2020, for a married couple filing jointly, the exclusion is $100,000. For a married person filing separately, the exclusion is $50,000. And for an individual filing as a single taxpayer or head of household, the exclusion is $75,000.

The 2019 pension exclusion allows married couples who file jointly can exclude $80,000 of income, married filing separately can exclude $40,000 and singles and heads of household can exclude $60,000 of income.

Papetti said you need to determine if you exceed the $100,000 income limit.

Countable income includes: wages, taxable interest, dividends, net profits from business, net gains from the disposition of property, pensions, annuities, IRA withdrawals, partnership income, S-Corporation income, net income from rents, royalties, patents and copyrights, net gambling winnings, alimony and any other income that’s subject to New Jersey income tax.

Some income is not included for New Jersey purposes: Social Security and pension income from the private or public sector as a result of permanent or total disability received prior to age 65. Once the disabled taxpayer attains age 65, the pension income is no longer exempt and is included. Also not included are U.S. military or survivor’s pension benefits, tax exempt interest from interest from obligations of the State of New Jersey or any of its political subdivisions and interest from direct federal obligations, such as U.S. Savings Bonds and U.S. Treasury Bills, Bonds, and Notes.

“Now to address your question of will your $70,000 combined pension income for you and your wife will be taxable as you expect to receive approximately $50,000 of Social Security income,” Papetti said. “Social Security income is not taxable nor includable in New Jersey Gross Income.”

So it sounds like your income will keep you eligible for the exclusion.

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This story was originally published on April 3, 2020.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.