I’m retired. Will my income be excluded from N.J. tax?

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Q. I’m retired and I have a simple 1040 tax form to fill out. My income is $16,008.36. Is $150,000 still the amount and if it is how do you calculate the total? I’m totally confused. I hope you can help me with this part of my state taxes.
— Taxpayer, maybe

A. Based on your income level, we may have good news for you.

New Jersey still has the pension exclusion.

It allows single filers to exclude all or part of retirement income if they’re age 62 or are disabled on the last day of the year, as long as your gross income for the year was equal to or less than $150,000, said Neil Becourtney, a certified public accountant and tax director with Smolin, Lupin & Co. in Red Bank.

If your filing status is single, and your gross income for the year is less than $100,000, the maximum pension exclusion is equal to $75,000, he said.

If a single filer has gross income of between $100,001 and $125,000, they are entitled to exclude 37.5% of their retirement income. For singles with gross income between $125,001 and $150,000, the excludible percentage drops to $18.75%, he said.

The state also provides something called the “Other Retirement Exclusion,” which is available for taxpayers who have claimed less than the maximum pension exclusion because their actual taxable retirement income was less than the maximum pension exclusion, Becourtney said.

“The same age and income thresholds for the pension exclusion apply and earned income from wages, net profits from businesses, partnerships and S Corporations cannot exceed $3,000,” he said. “This allows for non-retirement distribution income such as interest, dividends, and capital gains to also be excluded from New Jersey tax.”

Without a breakdown of what your $16,008 of income is comprised of, it cannot be determined how much of a pension exclusion you are entitled to, Becourtney said.

“There are worksheets contained in the Form NJ-1040 instructions. Assuming you have reached age 62 the likelihood is that you will end up with zero taxable income for New Jersey between the pension exclusion and other retirement income exclusion,” he said.

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This story was originally published on March 17, 2023.

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