25 Feb We’re new to N.J. How will the state tax our pensions?

Q. My husband and I receive Social Security and a pension from Pennsylvania. We moved to New Jersey. Are our Pennsylvania pensions taxed in New Jersey?
— Hopeful

A. Welcome to the Garden State.

Will New Jersey tax your pensions? It depends.

It will depend on your age, income level and marital status, said Michael Maye, a certified financial planner and certified public accountant with MJM Financial in Gillette.

We know you said you’re married.

“For married couples over the age of 62 or older with New Jersey total income $100,000 or lower, their pensions are tax-free in New Jersey,” said Maye.

Previously, the $100,000 level was a cliff and if you had $1 over, the entire pension income exclusion was lost, he said. But the state modified this several years ago so there’s now a phase-out if your income is up to $150,000.

As the Division of Taxation’s website says:

“If your total income is $100,001-$150,000, you can exclude a percentage of your reported taxable pension, annuity, and IRA withdrawals.”

At the $150,001, taxpayers are not entitled to any pension income exclusion, Maye said.

“A key thing to note is that Social Security is non-taxable in New Jersey and is therefore excluded from New Jersey income when determining eligibility of the
pension income exclusion,” Maye said.

That applies only to taxable New Jersey pensions, he said.

“For individuals who participated in a contributory plan where they were required to contribute and those contributions were already taxed, those contributions are not taxed when withdrawn,” he said “Also, military pensions paid by the U.S. Defense Finance and Accounting Service for service in the Army, Navy, Air Force, Marine Corps, or Coast Guard are considered nontaxable Income for New Jersey tax purposes.”

Maye also noted that civil service pensions, even if related to military service, do not qualify as nontaxable for New Jersey purposes.

“Civil service pensions may qualify for New Jersey pension exclusion depending on the person’s situation,” he said.

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This story was originally published in February 2025.

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