New Jersey allows eligible taxpayers to exclude all or part of their retirement income from New Jersey taxable income through the Pension Exclusion. The exclusion can apply to qualifying pension income, annuity income, and IRA withdrawals, subject to age, disability, and income limitations.
Program Entry
New Jersey Return → Subtractions From Income → Pension Exclusion
What Is the Pension Exclusion?
The New Jersey Pension Exclusion allows eligible taxpayers to exclude a portion of their taxable:
- Pension income
- Annuity income
- IRA withdrawals
from New Jersey Gross Income. The exclusion is intended to provide tax relief to retirees and disabled taxpayers.
Who Qualifies for the Pension Exclusion?
To qualify for the Pension Exclusion:
- You, or your spouse/civil union partner if filing jointly, must be 62 or older on the last day of the tax year or be disabled under Social Security guidelines; and
- Your total income for the entire year must be $150,000 or less.
If filing jointly and only one spouse meets the age or disability requirement, the return may still qualify for the maximum pension exclusion amount. However, only the retirement income of the qualifying spouse may be excluded.
Income Limits
Eligibility for the exclusion is based on total income.
Total Income of $100,000 or Less
If your total income is $100,000 or less, you may qualify for the maximum Pension Exclusion allowed for your filing status.
Maximum exclusion amounts are:
| Filing Status | Maximum Exclusion |
|---|---|
| Married/Civil Union Couple Filing Jointly | $100,000 |
| Single | $75,000 |
| Head of Household | $75,000 |
| Qualifying Widow(er)/Surviving Civil Union Partner | $75,000 |
| Married/Civil Union Partner Filing Separately | $50,000 |
Total Income Between $100,001 and $150,000
If total income exceeds $100,000 but does not exceed $150,000, the exclusion is reduced. New Jersey calculates the allowable exclusion using a percentage based on filing status and income level.
Total Income Above $150,000
Taxpayers with total income over $150,000 are not eligible for the Pension Exclusion.
What Income Qualifies?
Qualifying retirement income may include:
- Pension distributions
- Annuity distributions
- Traditional IRA withdrawals
- Other eligible retirement plan distributions
The allowable exclusion is generally limited to the lesser of:
- The actual taxable retirement income received; or
- The maximum exclusion amount allowed for your filing status and income level.
Part-Year Residents
Part-year residents may also qualify for the Pension Exclusion. However, the exclusion must generally be prorated based on the number of months the taxpayer was a New Jersey resident during the tax year.
Notes
- Social Security benefits are not included in New Jersey Gross Income and are not part of the Pension Exclusion calculation.
- The Pension Exclusion applies only to taxpayers who meet the age, disability, and income requirements.