06 Nov How will my N.Y. pension be taxed by N.J.?

Q. I’m a New York City teacher and set to retire in 2026 when I’m 55. I’m married and we live in Warren County. My income will be somewhere between $73,000 and $83k,000 a year. What sort of income tax will I be looking at if our combined earnings are below $100,000 a year, or over? I’m just looking for some basic idea – whether I can work in New Jersey post-retirement will I have to figure out my taxes and put money away each check if I pass a certain earnings threshold? I will also be asking my tax preparer.
— Almost there!!

A. Congrats on your pending retirement. There’s a lot to consider here.

Let’s start with the federal taxes.

There are and will continue to be seven tax brackets, said Michael Karu, a certified public accountant with Levine, Jacobs & Co. in Livingston.

Karu said for income at your anticipated level, there will be a variety of differences for 2026 if the Tax Cuts and Jobs Act (TCJA) expires, as it is set to do.

“One major change will be the reduction of the standard deduction from $30,850 to $16,700,” Karu said. “It also means that you may be able to get a greater benefit from itemizing your deductions.”

Of course, without more in-depth information on your income and expenses, nothing can be calculated, so working with your tax preparer is a smart move.

But here’s an example.

Let’s assume the TCJA is extended, your combined gross income is $100,850, and the standard deduction is $30,850. Karu said your taxable income would be $70,000 and you would be in the 12% tax bracket.

New Jersey is not as complicated, he said.

“There is a pension exclusion for individuals aged 62 and over, which is up to $100,000 if your New Jersey gross income does not exceed $150,000,” he said, noting that there is a phase-out up to the maximum number. “One benefit of living in New Jersey and collecting a New York pension is that you do not pay tax to New York.”

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This story was originally published in November 2024.

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.