04 May We’re married. Will we save in taxes by filing separately?

Q. My wife and I have a total income of approximately $160,000. My income is about $95,000 of which $65,000 is from pensions. My wife’s income is about $65,000 of which $52,000 is from pensions. We plan to file as married filing separately. How will that work with the pension exclusion?
— Figuring it out

A. It’s smart to see how your tax filings may improve what you owe to the IRS.

But the taxing authorities take this in mind.

On the pension exclusion, you can exclude all or part of the pension income reported if you meet certain criteria, said Kenneth Bagner, a certified public accountant with Sobel and Co. in Livingston.

You, and/or your spouse/civil union partner, if filing jointly, must have been 62 or older or disabled as defined by Social Security guidelines on the last day of the tax year, and your total gross income for the entire year must be $150,000 or less, he said.

“If your total gross income is $100,000 or less, you can exclude reported taxable pension, annuity, and IRA withdrawals up to the maximum amount for your filing status,” he said.

The maximum exclusion is $100,000 for those married filing jointly, $50,000 for those married filing separately and $75,000 for singles and heads of household.

The benefit phases out for those who earn between $100,001 and $150,000, he said.

“So at $160,000, you would lose all of the benefits so plan carefully to maximize your pension exclusion,” Bagner said.

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This story was originally published on May 4, 3033.

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