How New Jersey taxes retirement income
New Jersey does not tax Social Security benefits. Pensions and 401(k)/IRA withdrawals are partly taxed (there is an exclusion, then the rest is taxed). New Jersey does not tax Social Security or Railroad Retirement benefits. A Pension Exclusion lets qualifying taxpayers (age 62+ or disabled on 12/31, with total income of $150,000 or less for the year) exclude taxable pension, annuity, AND IRA withdrawal income up to a filing-status cap: $75,000 single, $100,000 MFJ/HOH/QW, $50,000 MFS. Above $150,000 total income, or if under 62 and not disabled, none of this income is excludable and it is taxed as ordinary income at NJ's regular graduated rates. A separate 'Other Retirement Income Exclusion' is available to qualifying 62+ filers with $3,000 or less of wage/business income who did not use their full pension exclusion. Traditional IRA/401(k) contributions themselves are not NJ-tax-deductible (they're taxed going in), so the previously-taxed basis comes out tax-free regardless of the exclusion; only the earnings portion of a withdrawal is subject to the exclusion/ordinary-rate treatment described above. Qualified Roth IRA distributions are excluded from NJ income entirely.
Retirement income tax in New Jersey, at a glance
| Income type | Taxed by New Jersey? |
|---|---|
| Social Security | No |
| Pensions | Partially (exclusion applies) |
| 401(k) / IRA withdrawals | Yes |
| Estate / inheritance tax | Inheritance tax |
| Avg. property tax rate | 2.2% of home value |
Does New Jersey tax Social Security benefits?
No. New Jersey does not tax Social Security benefits.
Does New Jersey tax pensions and 401(k) or IRA withdrawals?
Partly. New Jersey does not tax Social Security or Railroad Retirement benefits. A Pension Exclusion lets qualifying taxpayers (age 62+ or disabled on 12/31, with total income of $150,000 or less for the year) exclude taxable pension, annuity, AND IRA withdrawal income up to a filing-status cap: $75,000 single, $100,000 MFJ/HOH/QW, $50,000 MFS. Above $150,000 total income, or if under 62 and not disabled, none of this income is excludable and it is taxed as ordinary income at NJ's regular graduated rates. A separate 'Other Retirement Income Exclusion' is available to qualifying 62+ filers with $3,000 or less of wage/business income who did not use their full pension exclusion. Traditional IRA/401(k) contributions themselves are not NJ-tax-deductible (they're taxed going in), so the previously-taxed basis comes out tax-free regardless of the exclusion; only the earnings portion of a withdrawal is subject to the exclusion/ordinary-rate treatment described above. Qualified Roth IRA distributions are excluded from NJ income entirely.
For the mechanics of required withdrawals in retirement, see what is an RMD.
Sources
- New Jersey taxation of retirement income (Social Security, pensions, 401(k)/IRA): New Jersey Department of Revenue / Taxation.
- New Jersey estate / inheritance tax: New Jersey tax authority.