I’m moving back to New Jersey. How will my pension be taxed?
Q. I am a former resident of New Jersey and I will be moving back with my wife next year. We are both retired teachers receiving pensions from Pennsylvania, which doesn’t tax pensions. How will New Jersey taxes affect our pensions? I am also collecting Social Security but my wife is not.
A. Welcome back to New Jersey.
Depending on how much income you have, you may not be happy with changes to your tax situation.
It’s true that Pennsylvania does not tax pension, IRA or 401(k) income and New Jersey does, said Bernie Kiely, a certified financial planner and certified public accountant with Kiely Capital Management in Morristown.
However, he said, New Jersey does have a limited “Pension and Other Income Exclusion.”
In 2019, New Jersey allows married taxpayers to exclude up to $80,000 in income. It’s $60,000 for singles and $40,000 for those married filing separately - if they qualify. In 2020 and after, the numbers go to $100,000 married filing jointly, $75,000 for singles and $50,000 for those married filing separately.
Kiely said to qualify, you and your spouse must be 62 or older or disabled on the last day of the tax year and your total income for the entire year was $100,000 or less.
The $100,000 income figure does not include Social Security income because New Jersey does not tax Social Security income, he said.
“If your income is $100,001, the exclusion is not phased out. It is simply gone and all your income is taxed,” he said. “So moving from Pennsylvania to New Jersey may not be a bad idea if your income is $100,000 or less.”
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Karin Price Mueller writes the Bamboozled column for NJ Advance Media and is the founder of NJMoneyHelp.com. Follow NJMoneyHelp on Twitter @NJMoneyHelp. Find NJMoneyHelp on Facebook. Sign up for NJMoneyHelp.com’s weekly e-newsletter.