05 Mar Can I fund an IRA to qualify for the pension exclusion?

Q. If my wife and I earned $102,000 in New Jersey, can we do an IRA for $2,000 to get us under the $100,000 income amount to qualify for the pension exclusion?
— Trying to save

A. Nice try, but that’s not going to work.

It seems you are clearly aware of the fact that in order for you to claim a New Jersey pension exclusion, your gross income cannot exceed $100,000.

This is a “cliff” in that if your gross income exceeds $100,000, you get zero pension exclusion, said Neil Becourtney, a certified public accountant and tax partner with CohnReznick in Holmdel.

New Jersey does not allow any deduction for an IRA contribution, he said, noting the only retirement plan that New Jersey allows a deduction for is a 401(k) plan.

“So if your total gross income is $102,000 including some retirement plan distribution income, you will not be entitled to any pension exclusion,” Becourtney said.

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This story was originally published on March 5, 2021.

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