Pension exclusion
You qualify for the New Jersey pension exclusion if:
- You (and/or your spouse/civil union partner if filing jointly) were 62 or older or disabled as defined by Social Security guidelines on the last day of
the tax year; and
- Total income from Line 26 for the entire year was $100,000 or less.
Note: If the amount on Line 26 is more than $100,000, you are not eligible for the pension exclusion. You may still be eligible for a special exclusion of up to $6,000. See the instructions for Line 27b on page 26 to determine if you qualify for this special exclusion.
Other retirement benefits exclusion
If you (and/or your spouse/civil union partner if filing jointly) were 62 or older on the last day of the tax year, you may qualify to exclude other income on
Line 27b. There are two parts to the total exclusion: Part I, the unclaimed portion of your pension exclusion, and Part II, a special exclusion for taxpayers who are unable to receive Social Security or Railroad Retirement benefits. Each part has different eligibility requirements. Use Worksheet D to calculate the total exclusion amount you are eligible to claim. If you were a part-year resident, do not complete the worksheet. See page 6.
I. Unclaimed Pension Exclusion. You are eligible to use the unclaimed portion of your pension exclusion on Line 27b if:
- You (and/or your spouse/civil union partner if filing jointly) were 62 or older on the last day of the tax year;
and
- Total income from Line 26 for the entire year was $100,000 or less;
and
- Income from wages, net profits from business, distributive share of partnership income, and net pro rata share of S corporation income totaled $3,000 or less; and
- You did not use the maximum pension exclusion on Line 27a (your taxable pension, annuity, or IRA withdrawal was less than the exclusion
amount for your filing status or you did not receive pension, annuity, or IRA withdrawal income).
II. Special Exclusion for Taxpayers Unable to Receive Social Security or Railroad Retirement Benefits. This benefit is not related to the pension
exclusion and, if you qualify, you may claim it whether or not you use the maximum pension exclusion. You qualify for this additional exclusion on
Line 27b if:
- You (and/or your spouse/civil union partner if filing jointly) were 62 or older on the last day of the tax year;
and
- You (and your spouse/civil union partner if filing jointly) are unable to receive Social Security or Railroad Retirement benefits, but would have
been eligible for benefits had you fully participated in either program.
Note: When you and your spouse/civil union partner file a joint return and only one of you is 62 or older, you may claim the full exclusion.
However, only the income of the spouse/civil union partner who is 62 or older may be excluded. For more detailed information on using
the income exclusions on Line 27b, see Tax Topic Bulletin GIT-1, Pensions and Annuities.
Sale of a Principal Residence. If you sell your principal residence, you may qualify to exclude up to $250,000 ($500,000 for certain married/civil union couples filing a joint return) of any gain from your income. Capital gain is computed in the same manner as for Federal income tax purposes. Any amount that is taxable for Federal purposes is taxable for New Jersey purposes.
You can claim the exclusion if, during the 5-year period ending on the date of the sale, you have:
1. Owned the home for at least 2 years (the ownership test); and
2. Lived in the home as your principal residence for at least 2 years (the use test).
Note: If you owned and used the property as your principal residence for less than 2 years, and you qualify for a reduced exclusion for Federal purposes, you may claim a reduced exclusion for New Jersey purposes. You can exclude up to $250,000 ($500,000 for certain married/civil union couples filing a joint return) of gain from the sale of your principal residence if both 1 and 2 below apply.
1. Neither you nor your spouse/civil union partner if filing a joint return is excluding gain from the sale of another home.
2. You or your spouse/civil union partner if filing a joint return owned and lived in the home for periods adding up to at least 2 years within the 5-year period ending on the date of sale.
If you are a married/civil union couple, filing a joint return, both you and your spouse/civil union partner must meet the use test to qualify for the $500,000
exclusion. If only one spouse/civil union partner meets the ownership and use tests, the qualified spouse/civil union partner can exclude up to $250,000 of the gain when filing either a joint return or a married/CU partner, filing separate return. You cannot exclude the gain on the sale of your principal residence if, during the 2‑year period ending on the date of the sale, you sold another home at a gain and excluded all or part of that gain. If you cannot exclude the gain, you must include it in your income and complete Schedule B. However, you can claim a reduced exclusion if you sold the home due to a change in health or place of employment and you qualify for a reduced exclusion for Federal purposes.