22 Feb How will our N.Y.C. pensions be taxed if we move to N.J.?

Q. My wife and I are considering moving from New York City to New Jersey. We earn $110,000 from our New York City pensions that are excluded from state and city taxes. How much extra state tax from New Jersey would we expect to pay annually if we move to New Jersey?
— Thinking about it

A. There are a few items to consider here.

As a New Jersey resident you are taxed on your income regardless of which state it’s from.

Your New York pension is not excluded and would be taxable on your resident New Jersey return once you move here, said Cynthia Fusillo, a certified public accountant with Peapack Private Wealth Management in New Providence.

New Jersey does have a pension exclusion available to taxpayers with income under certain levels.

“For a married couple filing jointly, that income level is $100,000, meaning that once total income reaches this point, the exclusion is gone,” Fusillo said. “This is what’s known as a cliff in terms of the point up to which this particular exclusion may be used. Since your pensions total $110,000 annually, it’s safe to say you will not qualify for the pension exclusion.”

You’ve asked how much extra state tax you will pay if you move to New Jersey. This is really a two-pronged question.

First, Fusillo said, you will not pay tax on the pension income to both New York and New Jersey once you move here. If any portion of your pensions are currently taxable in New York State and New York City as residents there, they will no longer be taxable in New York once you move out, she said.

As far as how much tax you will actually pay, it is impossible to answer without having your complete picture.

“As you may know, tax rates are bracketed for certain income levels. For illustrative purposes, let’s say your taxable income fell at $200,000,” she said. “Your marginal tax rate in both states would be virtually the same, falling at approximately 6.5%.”

But you would no longer be subject to the added New York City tax.

“There is no provision for itemized deductions in arriving at New Jersey taxable income,” Fusillo said. “We do allow a property tax deduction and a portion of qualified medical expenses. In New York, you may still be itemizing. I mention this so that you’re aware that coming up with your taxable income is different in each state.”

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This story was originally published on Feb. 22, 2021.

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