16 Apr If we retire to New Jersey from New York, will our taxes fall?

Q. My wife is 65 and I’m 68. We are thinking about moving and retiring to New Jersey from New York. Our pensions total $96,000. Our Social Security totals $55,000. We both have 401(k)s but we’re not touching them until age 72. Do we qualify for the pension exclusion? And if we have a mortgage and property taxes, will this bring our income down for the exclusion?
— Trying to decide

A. Congrats on your pending retirement.

The New Jersey pension exclusion is a benefit meant to keep more retirees in the state.

For 2019, if you were a New Jersey resident, your taxable federal income would be $117,750, said Bernie Kiely, a certified financial planner and certified public accountant with Kiely Capital Management in Morristown.

The math? He said pension income of $96,000, plus 85% of your $55,000 in Social Security, minus $27,000 for the standard deduction for a couple over age 65 would result in a total federal tax of $17,182.

For New Jersey purposes, your gross income would be $96,000 — your pension income, Kiely said.

And New Jersey does not tax Social Security. There is not even a line on the return for it, he said.

“Since you both are over the age of 62 and your income is not over $100,000, you are eligible for the 2019 pension exclusion of $80,000 — $100,000 for 2020,” he said. “This bring your income down to $16,000 on line #29.”

He said the New Jersey 1040 instructions for line #29 state:

Required to file a return: You are required to file a return if your income on line 29 is more than the filing threshold:
•• $20,000 Married filing jointly, Head of Household, or Qualified Widow(er)
•• $10,000 Single or married/CU partner filing separate return

“Congratulations! Since your income on line 29 is less than $20,000, you are not even required to file a New Jersey income tax return,” he said. “Of course, if you had New Jersey income tax withheld on your pensions be sure to file the return in order to receive your tax refund.”

Just remember that may change when you start taking distributions from your 401(k), assuming they’re not of the tax-free Roth variety.

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This story was originally published on April 16, 2002.

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.