Q. I am single and retired but I have an opportunity for some seasonal work. Will I still be eligible for the New Jersey pension exclusion or will I have to pay taxes? My retirement income is about $48,000 per year and the side work would make about $2,000.
— Still working
A. We’ve got good news for you.
As a single filer, if your gross income is below $75,000 and assuming you have attained age 62 by the end of the year, you can exclude up to $75,000 of retirement income from New Jersey tax, said Neil Becourtney, a certified public accountant and tax partner with CohnReznick in Holmdel.
“That leaves you with the remaining $2,000 or so of earnings that you are anticipating as potentially subject to New Jersey tax,’ he said. “That income will be offset by the `other retirement income exclusion’ if the maximum pension exclusion is not claimed, and earned income is $3,000 or less.”
In your situation, even if your earned income was to exceed $3,000, thus barring you from claiming the “other retirement income exclusion,” only that income would potentially be subject to New Jersey tax, Becourtney said. It would be reduced by your personal exemption(s), medical expenses exceeding 2% of gross income after the pension exclusion and real estate taxes of up to $15,000.
“So absent you generating substantial earnings from the seasonal work, the likelihood is that you will incur zero New Jersey tax,” he said, noting that even if your income is exempt from New Jersey tax, it may be subject to federal income taxes.
Email your questions to Ask@NJMoneyHelp.com.
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.
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