10 May Is my IRA withdrawal subject to tax in N.J.?

Q. I withdrew money from a traditional IRA in 2022. The taxable portion is $26,000. I made under $150,000. Am I excluded from paying taxes on the taxable amount in the State of New Jersey?
— Taxpayer

A. Even though the 2022 tax filing deadline has passed, we realize you may have filed for an extension or you plan to amend your return if something wasn’t right.

Let’s consider the so-called pension exclusion.

New Jersey allows individuals to exclude part or all of their pension income assuming they meet certain qualifications, said Joseph Sarnecki, a certified financial planner with U.S. Financial Services in Fairfield.

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 income for the entire year must have been $150,000 or less, he said.

Depending on your total income, the amount you can exclude will vary, he said.

If married filing jointly and your income is less than $100,000, you can exclude your taxable pension, annuity and IRA withdrawals. If filing single, total income must be less than $75,000 to exclude the full amount, Sarnecki said.

If you are married filing jointly and have total income of $100,000 to 125,000, you can exclude 50% of your retirement income. From $125,000 to $150,000 of income, you can exclude 25%, he said.

Those filing single with total income of $100,000 to $125,000, you can exclude 37.5% of your retirement income, and from $125,000 to $150,000, you can exclude 18.75%, he said.

If you have income of over $150,000, you are not eligible, he said.

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This story was originally published on May 10, 2023.

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