New Jersey taxes pension income as ordinary income, similar to wages, investment income, etc. If you are over 62 and your total income is under a certain amount (varies based upon your circumstances), you may exclude a portion of your retirement income, with the maximum amount based upon your filing status. You may end up being double-taxed on your retirement income in New Jersey. Here is why: Pennsylvania does not allow a deduction for retirement contributions, so the money was taxed by the state when it went in; now it could be taxed again by New Jersey on the way out. Note: Social Security and other retirement income are not taxed in Pennsylvania.
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Answered by: David A. Caplan, CPA, is a sole practitioner in Lafayette Hill, Pa.