20 Jan Are Social Security, a pension and unemployment counted as income?
Q. I am 66 years old and collect my pension, Social Security, unemployment and an early-out retirement package of 50% pay. Are all those sources counted as income?
A. The short answer is yes, everything is taxable.
Pensions, including IRAs, are taxable income, with the exception of Roth IRAs, said Michael Karu, a certified public accountant with Levine, Jacobs & Co. in Livingston.
Unemployment is taxable for federal purposes, but not for New Jersey, as is Social Security, he said.
“The only benefit, if you can call it that, is that Social Security is not 100% taxable,” he said. “The percentage varies based on your total income.”
Per the IRS, to find out if Social Security benefits are taxable, taxpayers should take one half of the Social Security money they collected during the year and add it to their other income.
Other income includes pensions, wages, interest, dividends and capital gains, it said.
If you are single and that total comes to more than $25,000, then part of the Social Security benefits may be taxable.
If you are married filing jointly, you should take half of their Social Security, plus half of your spouse’s Social Security, and add that to all your combined income, the IRS said. If that total is more than $32,000, then part of your Social Security may be taxable.
The IRS said 50% percent of a taxpayer’s benefits may be taxable if they are:
- Filing single, single, head of household or qualifying widow or widower with $25,000 to $34,000 income.
- Married filing separately and lived apart from their spouse for all of 2019 with $25,000 to $34,000 income.
- Married filing jointly with $32,000 to $44,000 income.
Up to 85% of a taxpayer’s benefits may be taxable if they are:
- Filing single, head of household or qualifying widow or widower with more than $34,000 income.
- Married filing jointly with more than $44,000 income.
- Married filing separately and lived apart from their spouse for all of 2019 with more than $34,000 income.
- Married filing separately and lived with their spouse at any time during 2019.
Also note that New Jersey offers a pension exclusion for those who earn less than $100,000 a year are 62 or older or disabled as defined by the Social Security Administration’s guidelines, so it’s possible you could escape state taxes on your income.
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This story was originally published on Jan. 20, 2021.
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