14 Oct When I retire, how much of my income will N.J. tax?

Q. When I retire in less than two years, can I exclude some of my 401(k) and IRA income from taxes if my total income is less than $150,000? I should also have Social Security income of about $40,000. Are there any loopholes I need to know?
— Trying to plan

A. Congratulations on your upcoming retirement.

In recent years, New Jersey has come up with some tax-friendly policies for retirees.

The one you’re talking about is commonly called the pension exclusion.

First, though, it’s important to know that New Jersey does not tax Social Security income.

The pension exclusion covers, among other income sources, distributions from pensions, 401(k)s, 403(b)s, IRAs and annuities, said Jodi Cirignano, a certified financial planner and certified public accountant with Peapack Private Wealth Management in New Providence.

She said the exclusion is available to taxpayers 62 and older and the exclusion amount depends on your filing status.

For a married couple, pension and retirement income is excluded from state taxation if income is $100,000 or less, she said.

For married couples with up to $150,000 of income, partial exclusions are allowed.

“Taxpayers with gross income of more than $100,000 but not over $125,000 may exclude 50% of pension and retirement income,” Cirignano said. “Taxpayers with more than $125,000 but not over $150,000 of gross income may exclude 25% of pension and retirement income.”

For singles, a 75% exclusion is allowed for income of less than $75,000, she said. Those with gross income of more than $100,000 but not over $125,000 may exclude 37.5%, and with gross income of more than $125,000 but not over $150,000, singles may exclude 18.75% of retirement income, she said.

In terms of other tax reduction opportunities in New Jersey, the state recently rolled out a new property tax relief program called ANCHOR.

Homeowners with incomes of $150,000 or less will receive $1,500, while homeowners with incomes more than $150,000 and up to $250,000 will receive up to $1,000, she said. Renters with incomes of $150,000 or less will receive $450.

The benefit application that’s available now covers the 2019 tax year, and the application deadline is Dec. 31, 2022.

Cirignano recommends you consult with your tax preparer to see if you’re eligible for any other tax relief programs or tax reduction opportunities in the state.

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This story was originally published on Oct. 14, 2022.

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.