30 Jan Does Social Security count for the pension exclusion?

Q. I am confused about whether Social Security income affects qualification for the pension exclusion. If don’t include it, I qualify. But if I include it as part of my total income, I do not qualify. Please clarify.
— Taxpayer

A. Great question.

The pension exclusion allows senior taxpayers who earn under a certain amount to exclude that income from tax.

New Jersey, like many states, does not tax any portion of Social Security benefits, Neil Becourtney, a certified public accountant and tax director with Smolin, Lupin & Co. in Red Bank.

But for federal income tax purposes, as much as 85% can be subject to tax, he said.

“Your Social Security benefits are not reportable on Form NJ-1040,” Becourtney said. “Accordingly, they are not a component of your total New Jersey gross income that is used in calculating the amount of the pension exclusion you may be entitled to claim.”

This also will help you when it comes to claiming a medical deduction for your total out-of-pocket medical expenses in excess of 2% of New Jersey gross income, Becourtney said, because it won’t include any Social Security benefits.

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This story was originally published in January 2026. 

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