08 Dec Will I owe taxes to N.J. and feds on this income?

Q. I will have a combined monthly income when I retire including Social Security, 403(b) withdrawals and a defined benefit payment adding up to $72,000 in 2022. Do I have New Jersey state taxes on this amount? Federal taxes?
— Taxed enough

A. There are a lot of factors that come into play, and you didn’t provide all the details we need.

For example, are you single? How much of the $72,000 is Social Security versus retirement income? Is your retirement income 100% taxable or do you have some tax basis in these plans? We’re going to assume that this income is fully taxable.

“If your income is $0 to $100,000, regardless of filing status, you can exclude your taxable retirement income up to the maximum stated for your filing status,” said Laurie Wolfe, a certified financial planner and certified public accountant with Peapack Private Wealth Management in New Providence.

A single person making $100,000 or less can exclude $75,000 from New Jersey tax, she said. A married couple can exclude $100,000 at this income level and someone that is married, but filing a separate return from their spouse, could exclude $50,000. The exclusion is phased out for people who earn between $100,001 and $150,000. There is no exclusion for those making $150,001 or more.

“Assuming you are either married filing jointly or single, then you will not have New Jersey tax at this income level,” she said. “If you are married filing separately, I would need to know how much of the $72,000 is Social Security income. New Jersey does not tax Social Security income.”

So if you subtract out that income and the balance is $50,000 or less, then you will not be subject to New Jersey income tax, she said. Even if it is more than $50,000, you will be entitled to a $1,000 personal exemption per person and a limited deduction for property taxes, among other potential deductions, she said.

For federal taxation, again, we would need additional information.

“There is federal taxation on up to 85% of Social Security,” Wolfe said. “Without having any additional information, I would say that there is a likelihood, at this income level and without itemizing deductions, that you would be subject to federal taxation, whether you are single or married.”

You should seek the advice of a tax professional and provide them with the details of your income and deductions to get an answer specific to your circumstances.

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This story was originally published on Dec. 8, 2021.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.