The state of New Jersey has made the following tax law changes for tax year 2021:
- Retirement Income Exclusion: previously limited to those with income of $100,000 or less, were expanded. Retirees who are 62 or older and earn:
More than $100,000 (up to $125,000), can exclude 50 percent of their pension and retirement income if they file jointly. Married and civil union couples each can exclude 25 percent if they file separately. Single, Head of-Household, and Qualifying Widow(er) taxpayers can exclude 37.5 percent. In addition, these filers may also be able to exclude a percentage of any other income they have if they meet the requirements.
More than $125,000 (up to $150,000), can exclude 25 percent of pension and retirement income for joint filers, 12.5 percent each for married or civil union couples filing separately, and 18.75 percent for Single, Head of Household, and Qualifying Widow(er) filers. They can also exclude a percentage of any additional income if they meet the requirements.
- N.J. Earned Income Tax Credit: New Jerseyans who are at least 18 and who cannot claim a qualifying child are eligible for the NJEITC even if they are not eligible for the federal credit due to the age limits. The State credit for these taxpayers is calculated based on 40% of the federal EITC. A new law also eliminates the maximum age limit for the credit for those who do not claim a qualifying child.
- Combat Pay: For Tax Year 2021 and beyond, combat pay is not taxable in New Jersey. You do not have to include income received as combat zone compensation on your tax return.
- Other Exempt Income: income that is exempt from tax includes the State’s middle-class tax rebates as well as paycheck protection program loan amounts forgiven through the federal CARES Act.
- Child and Dependent Care Credit: New Jersey law extends the Child and Dependent Care Credit to taxpayers with taxable income of $150,000 or less and allows the credit to be refundable.
- Charitable Contributions: Meals on Wheels has been added to the list of charitable groups
You can read more about these tax law changes here.