What New Jersey doesn't tax
- Social Security benefits are fully exempt from New Jersey income tax.
- Pension and retirement income exclusion: taxpayers 62 or older (or disabled) can exclude up to $100,000 of pensions, annuities and IRA withdrawals if married filing jointly ($75,000 single, $50,000 married filing separately), when total income is $100,000 or less. A partial exclusion applies up to $150,000 of income.
- Some taxpayers who can't use the full pension exclusion may qualify for an additional "other retirement income" exclusion.
What New Jersey does tax
- Pension, annuity and IRA income above the exclusion
- Investment income, including interest, dividends and capital gains, at regular rates
- New Jersey's top rate reaches 10.75% on income over $1 million
Planning ideas for New Jersey retirees
- Watch the income cliff. The exclusion phases down sharply above $100,000 of income, so the timing of IRA withdrawals and Roth conversions can matter.
- Property tax relief programs, including Stay NJ and the Senior Freeze, have their own income tests. See NJ property tax relief.
- Moving? If you're leaving New Jersey or New York for retirement, residency rules determine which state can tax you.
Frequently asked questions
Does New Jersey tax Social Security?
No. Social Security benefits are exempt from New Jersey income tax.
How much retirement income can I exclude in New Jersey?
If you're 62 or older with total income of $100,000 or less, up to $100,000 if married filing jointly, $75,000 if single and $50,000 if married filing separately. Partial exclusions apply up to $150,000 of income.
Are IRA withdrawals taxed in New Jersey?
They can be, but they generally count toward the pension and retirement income exclusion, and the part of each withdrawal attributable to contributions that were already taxed by New Jersey isn't taxed again.
Is New Jersey a good state to retire in for taxes?
For moderate-income retirees, the Social Security exemption and retirement income exclusion make it more favorable than many expect. Property taxes are the bigger factor, which is where the relief programs come in.