05 Sep Will N.J. tax my income once I leave the state?

Q. My wife and I plan on moving from New Jersey to Pennsylvania in 2026 and I have a couple of questions. We are both retired and our only income is from a qualified and a non-qualified pension, distributions from IRAs, two state pensions and some interest and dividends. Is the income under reciprocal tax agreements with the states so I won’t have to file a New Jersey tax return after the first year? And what will I need to report to Pennsylvania given that the PA-40 instruction page says early retirement incentive plans remain taxable in Pennsylvania even when you move out of the state? Does New Jersey have such a law?
— Moving out

A. We’re sorry to hear you’re leaving the Garden State.

But you have a few things to consider.

You are correct that you will have to file part-year tax returns for New Jersey and Pennsylvania for 2026, said Bernie Kiely, a certified financial planner and certified public accountant with Kiely Capital Management in Morristown.

He said Pennsylvania does not tax retirement plan income, including pension income and IRA distributions.

“This is one reason New Jersey is losing taxpayers to Pennsylvania,” Kiely said.

Additionally, you mentioned that Pennsylvania states that early retirement incentive plans remain taxable in Pennsylvania even when you move out of state.

“In your case, you are moving into Pennsylvania. Your early retirement incentive plan income will still be taxed by New Jersey even when you move out of state,” he said. “This is because this income was earned in New Jersey, so New Jersey will still tax it.”

So you will have to file a New Jersey Non-Resident income tax return to report the W-2 income, even after you’ve left.

“When you file your Pennsylvania income tax return, Pennsylvania will give you a credit for the tax you paid to New Jersey so the income won’t be taxed twice,” he said.

Because the income is reported on a W-2, you will show it as salaries and wage income on your Pennsylvania return, Kiely said.

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This story was originally published in September 2025.

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