08 Jul Is there still a pension exclusion in N.J.?

Q. I’ll be 62 in 2022. My wife is younger. Will there be a New Jersey tax exclusion this year for private pensions? Is there an income limit?
— Taxed enough

A. While New Jersey may be a high tax state, it does offer some help to retirees through the pension exclusion.

It’s a big help — if you qualify.

You qualify for the New Jersey pension exclusion if you and/or your spouse, if filing jointly, are 62 or older on Dec. 31, 2022, and if your income was $150,000 or less, said Jeanne Kane, a certified financial planner with JFL Total Wealth Management in Boonton.

You both don’t have to be 62 for you to qualify, she said.

But, because your wife is not yet 62, only your pension income will be eligible for the exclusion, she said.

If you qualify, you can claim the lesser of your actual taxable pension income or the maximum pension exclusion amount for your filing status, which is based on your income, she said.

“If your income is less than $100,000, you may exclude up to 100% if you are married filing a joint return or $50,000 if you file as married filing separately,” she said. “If your income is between $100,001 and $150,000, you can exclude a portion.”

How much depends on your income.

If income is between $100,001 and $125,000, 50% of your taxable pension and other retirement income is eligible if you file married filing jointly, or 25% if you file married filing separately, she said.

If income is from $125,001 to $150,000, 25% of your pension and other retirement income if you file married filing jointly, or it’s 12.5% if you file married filing separately, she said.

“New Jersey doesn’t tax Social Security income, so this income won’t count towards the exclusion income thresholds,” Kane said. “As a retiree on a fixed income, the pension exclusion can save you a lot in taxes if you qualify.”

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This story was originally published on July 8, 2022.

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