03 May Is a N.Y. pension eligible for the pension exclusion?
Q. Our total income is less than $100,000 but when I did our tax return, it doesn’t seem the state is allowing me to take the pension exclusion. Is a New York City pension included in the exemption? We file jointly and are in our 70s.
— Trying to save
A. New Jersey taxpayers can exclude all or part of their income if they meet the certain qualifications.
You are eligible if you, and your spouse if you are filing jointly, are 62 or older or because of a disability, you are eligible for Social Security benefits, and you have $100,000 or less of gross income, said Gerard Papetti, a certified financial planner and certified public accountant with U.S. Financial Services in Fairfield.
If only one spouse is 62 or older or disabled, you can only exclude the income of the qualified spouse.
How much you can exclude is based on your filing status, he said.
For a married couple filing jointly, the exclusion is $100,000. Those married filing separately can exclude $50,000, and singles can exclude $75,000.
To determine if you exceed the $100,000 threshold, Papetti said, you must count wages, taxable interest, dividends, net profit from business, net gains from the disposition of property, pensions, annuities and IRA withdrawals. You must also include income from partnerships or S-Corporations, rent, royalties, patents, copyrights, gambling winnings, alimony and any other income that’s taxed by the state.
Specifically, there are some income types that are not included: Social Security, pension income from private or public sector as a result of permanent or total disability received prior to age 65, U.S. military or survivor’s pension benefits and certain tax-exempt interest.
Now to your question about whether your New York City pension can be excluded.
Yes it can. Papetti said retirement income from all state and local government, teachers and federal pensions — both contributory or non-contributory — are eligible.
“Based on your facts of the amount of your taxable income, including $70,287 of pension income, and your age, you should qualify and be eligible for the New Jersey pension exclusion,” Papetti said.
He recommends you contact the state at (609) 292-6400 to determine why they are not allowing you to take the exclusion.
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This story was originally published May 3, 2021.
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