17 Apr Are the income rules for pension exclusion the same as Senior Freeze?

Q. Is the taxable income from the Roth conversion, which is reported on your NJ 1040 tax return, counted as income when determining if you qualify for the New Jersey pension exclusion? It seems to me if a Roth conversion is not counted as income for the Senior Freeze then it shouldn’t be counted as income for the Retirement Income Exclusion.
— Taxpayer

A. Most state programs have different rules, even when it seems the rules should be more consistent.

This is one of those cases.

The rules for calculating your income for purposes of the pension exclusion differ greatly from the rules under the Senior Freeze property tax reimbursement program, said Neil Becourtney, a certified public accountant and tax director with Smolin, Lupin & Co. in Red Bank.

“You are correct that a rollover of a retirement plan distribution, which is what the conversion of a traditional IRA to a Roth IRA constitutes, is not included for Senior Freeze purposes yet it is included in total income used to calculate the retirement income exclusion,” he said.

On the other hand, there are various income items that are not subject to New Jersey income tax such as Social Security benefits and unemployment compensation that are included in income for Senior Freeze purposes, Becourtney said. Plus, an inheritance is never subject to income tax yet it is included under the Senior Freeze rules, he said.

“Another distinction is that one must attain age 62 to be eligible for the retirement income exclusion compared with being required to attain age 65 to be eligible for the Senior Freeze program,” he said.

Email your questions to .

This story was originally published in April 2024.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.