06 Aug Can I get the pension exclusion if I move out of N.J.?

Q. I plan on withdrawing $50,000 from a traditional IRA in 2023 when I turn 62 to avoid any New Jersey. Buy if I move out of New Jersey in 2023 before I turn 62, would I still qualify for the $50,000 retirement income exclusion?
— Getting out

A. New Jersey provides a pension exclusion for the income received during the tax year from taxable pensions, annuities, and IRA withdrawals.

To qualify for the exclusion, the taxpayer or spouse needs to have attained age 62 or be considered disabled by Social Security guidelines as of Dec. 31 of the tax year, and total reportable gross income cannot exceed $100,000, said Neil Becourtney, a certified public accountant and tax partner with CohnReznick in Holmdel.

But if you’re not filing a New Jersey tax return as a resident, you wouldn’t get the exclusion. But you won’t be taxed by New Jersey, either.

“It appears you are somewhat familiar with the rules since you desire to avoid incurring New Jersey taxes on your IRA distribution planned for 2023, and your planning is spot on,” Becourtney said. “If you receive a retirement distribution after you have moved from New Jersey to another state, it will be exempt from taxation by New Jersey as federal law bars states from taxing nonresidents on retirement plan distribution income.”

He said if you still reside in New Jersey when you receive the distribution, you do not need to have attained age 62 by actual date you get the distributions as long as they happen in 2023, the year you will reach age 62.

To be eligible, you must have income of less than $100,000 for a joint filer, $75,000 for a taxpayer filing as single or head of household, and $50,000 if using a married separate filing status, Becourtney said.

“If you will have attained age 62 as of Dec. 31, 2023, any IRA distributions you receive during 2023 will be eligible for the pension exclusion as long as total gross income does not exceed $100,000 for 2023,” he said.

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This story was originally published on Aug. 6, 2020.

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