22 Nov I’m a senior. Will I have to pay taxes on this stock sale?

Q. I’m a senior resident in New Jersey. Will I have to pay tax on capital gains made from selling stock if my total income for the year is under $100,000? I know I have to pay tax on my federal return, but I’m not sure about what’s considered income for the pension exclusion. These were long-term capital gains.
— Taxed enough

A. The pension exclusion allows eligible seniors to keep retirement income free of tax, as long as they qualify.

You mentioned having income of less than $100,000 a year.

Beginning with tax year 2021, the income limit for the exclusion increases to $150,000, subject to a phase-out formula for income over $100,000 for taxpayers aged 62 or older or disabled, said Gail Rosen, a Martinsville-based certified public accountant.

“The pension exclusion only applies to excluding retirement taxable income,” she said. “This was put into place to incentivize retirees to stay in New Jersey.”

There still may be good news for you, Rosen said.

If you are in the 10% or 12% federal tax bracket, you will owe no federal tax on the sale of stock you held more than one year, she said. For example, if you are single, this applies to you if your taxable income is less than $80,000.

“But taxable income from the gain of your sale of stock is included in New Jersey income and cannot be excluded under the pension exclusion,” she said.

There is also what’s called the “Other Retirement Income Exclusion.” This applies when you are 62 or older by the last day of the year and your total income for the entire year is $150,000 or less (phased out between $100,000 to $150,000).  Your earned income must be $3,000 or less and you had left over exclusion from the retirement exclusion, she said.

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

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