31 Dec The state doesn’t answer our calls. Can you explain the pension exclusion?

Q. I’m recently retired and I’m trying to understand the pension exclusion for New Jersey income taxes. I know the income limit is $150,000 and I’m trying to understand what is counted as income. I have interest from U.S. Treasuries, which aren’t taxed in New Jersey. Is the interest still counted as income for the $150,000 limit? I’ve tried to contact the state and I always get a recording that they’re too busy to transfer my call, then I’m disconnected. It’s pretty frustrating that no one is ever available.
— Annoyed

A. We know it can be hard to reach a person when you call a state helpline.

The state doesn’t have enough people to handle the number of calls received. It’s not an excuse, but it’s still the reality.

The New Jersey pension exclusion has several rules, said Michael Karu, a certified public accountant with Levine, Jacobs & Co. in Livingston.

The first is an age requirement. You and/or your spouse, if filing as married filing jointly must be 62 or older by the end of the tax year, or disabled as per the Social Security guidelines, Karu said.

The second is an income requirement. This has a phase-out from $100,000 to $150,000.

“Assuming a filing status of married filing jointly, and total income of $100,000, a portion of which is your pension, then 100% of the pension received would be excluded,” Karu said. “If the total income is between $100,001 and $125,000, then 50% is excludable. If the total income is between $125,001 and $150,000, then only 25% is excludable.”

For calendar year 2023, total income was the amount shown on Line 27 of your NJ-1040, Karu said.

“Total income does not include Social Security, New Jersey municipal bond interest, or other non-NJ taxable items, such as U.S. Treasury Bill or U.S. Savings Bond interest,” he said.

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This story was originally published in December 2024.

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