Will I owe NJ and Federal taxes on this income?
Q. I will have a combined monthly income when I retire, including Social Security, 403 (b) withdrawals, and a defined benefit payment totaling $ 72,000 in 2022. Do I pay state taxes of New Jersey on that amount? Federal taxes?
– Quite taxed
A. There are a lot of factors that come into play, and you haven’t provided all the details we need.
For example, are you single? How much of the $ 72,000 is Social Security in relation to retirement income? Is your retirement income 100% taxable or do you have a tax base in these plans? We will assume that this income is fully taxable.
“If your income is $ 0 to $ 100,000, regardless of filing status, you can exclude your taxable retirement income up to the maximum stated for your deposit status, ”said Laurie Wolfe, Chartered Financial Planner and Chartered Accountant at Peapack Private Wealth Management in New Providence.
One person doing $ 100,000 or less can exclude $ 75,000 from New Jersey tax, she said. A married couple can exclude $ 100,000 at this income level, and a married person who files a separate return from their spouse could exclude $ 50,000. The exclusion is phased out for people earning $ 150,000 or less.
“Assuming you’re married or single, you won’t have New Jersey tax at that income level,” she said. “If you’re married and filing separately, I would need to know how much of the $ 72,000 is Social Security income. New Jersey does not tax Social security income.
So if you subtract that income and the balance is $ 50,000 or less, you won’t be subject to New Jersey income tax, she said. Even if it’s over $ 50,000, you’ll be entitled to a personal exemption of $ 1,000 per person and a limited deduction for property taxes, among other potential deductions, she said.
For federal taxation, again, we would need additional information.
“There is a federal tax on up to 85% of Social Security,” Wolfe said. “Without having any additional information, I would say that there is a probability, at this income level and without itemizing the deductions, that you are subject to federal tax, whether you are single or married.”
You should seek advice from a tax professional and provide them with details of your income and deductions to get a specific answer to your situation.
Email your questions to [email protected].
Karin Price Mueller writes on Bamboo 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 electronic newsletter.