02 Jan Trying to qualify for pension exclusion

Q. Because you can lose all pension exclusion with income over $100,000, what investments are recommended to keep taxable income below $100,000?
— Investor

A. You’re talking about the newly expanded retiree pension exclusion in New Jersey.

Eligible taxpayers who are married filing jointly can exclude $40,000 of income from taxes for 2017, and the amount will go up by $20,000 a year until it reaches $100,000 in 2020.

Eligible singles can exclude $30,000 in 2017, and those married filing separately can exclude $20,000.

The catch is that if your earnings are more than $100,000, you lose the entire benefit.

(Don’t forget that Social Security income doesn’t count in the calculation.)

So we understand you want to lower your investment income to make sure you stay under the threshold. That doesn’t give you many options.

“The only things that would not be taxable would be governmental bonds,” said Timothy Brunnock, a financial advisor and attorney with Trinity Financial Strategies in Morristown.

Other than that, you’re out of luck.

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This post was first published in January 2018.