28 Jun Will N.J. tax this pension if I move out of state?

Q. I currently receive a pension from New Jersey through the Police and Firemen’s Retirement System. In addition I work in New Jersey and receive an income that combined puts me over the New Jersey pension exclusion. I was considering moving to Pennsylvania or New York, but I am wondering if I will still have to pay full New Jersey income tax on my pension income?
— Overtaxed

A. You’re one of many people considering how they can lower their overall tax liability.

In terms of being taxed by two states, you’re in luck.

Under federal law, pensions, regardless of the source, are only taxable to the state in which you live, said Michael Karu, a certified public accountant with Levine, Jacobs & Co. in Livingston.

“If you reside in New Jersey, you pay tax on that pension to New Jersey, even if it was due to employment in another state. The same is true in reverse,” Karu said. “Your State of New Jersey pension will not be subject to New Jersey state gross income tax unless you live in New Jersey.”

Once you move to another state, you only will pay state income tax to your resident state on the pension, he said, noting this is a huge benefit to people who earned their pensions in a state with an income tax and subsequently, move to a state without an income tax like Florida or Texas.

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This story was originally published on June 28, 2021.

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