11 May Do we qualify for the New Jersey pension exclusion?

Q. My wife and I are both 73 years old and we are both retired. Our income is $79,000, not counting Social Security. Do we qualify for the New Jersey pension exclusion?
— Retired

A. We’re happy to tackle this question for you.

The New Jersey pension exclusion is one strategy the state has imposed to try to stop retirees from fleeing the state because of high taxes.

For your 2019 tax return, the pension exclusion allows married couples who file jointly to exclude $80,000 of income. Those who are married filing separately can exclude $40,000 and singles and heads of household can exclude $60,000 of income.

And as you noted, Social Security is not considered taxable income for New Jersey purposes.

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.

To qualify, you must have income of less than $100,000. If you go over that by one penny, you lose the entire exclusion.

So with your income of $79,000, you should qualify for the exclusion for both 2019 and 2020. Speak to your tax preparer to be sure you’re not missing anything.

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This story was originally published on May 12, 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.