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Division of Taxation

Retirement Income Exclusion and Special Exclusion

You worked hard during your career to provide income through your retirement. The State of New Jersey offers several retirement income exclusions you may qualify to use that can reduce your taxable income.

Pension Exclusion

You qualify for a partial or full 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 (December 31 for calendar year filers); and
  • Your total income for the entire year was $150,000 or less.

If you qualify, you can claim the lesser of your actual taxable pension income or the maximum pension exclusion amount for your filing status and gross income (see chart below).

When you and your spouse/civil union partner file a joint return and only one of you is 62 or older or disabled, you can still claim the maximum pension exclusion. However, you can exclude only the pension, annuity, or IRA withdrawal of the qualified spouse/civil union partner.

If your gross income is $100,000 or less, the exclusion is based on an amount of your pension income. If your income gross income is $100,001 or more, the exclusion is based on a percentage of your pension income.

Gross Income Married/CU Couple,
Filing Joint Return
Married/CU Partner,
Filing Separate Return
Single, or Head of Household,
or Qualifying Widow(er)/Surviving CU Partner
$1- $100,000 $100,000 $50,000 $75,000
Gross Income % of Pension Income Excluded Filing Status
$100,001 -  $125,000 50 % Married filing  jointly
25 % Married filing separately
37.5 % Single/head of household/qualifying widow(er)
$125,001 -  $150,000 25 % Married filing  jointly
12.5 % Married filing separately
18.75 % Single/head of household/qualifying widow(er)
$150,001 or more Not eligible for a pension exclusion

You may be able to exclude other types of income (wages, interest, dividends, etc.) from your total income. There are two parts to these exclusions, and each part has different eligibility requirements:

Unclaimed Pension Exclusion. If you did not use the maximum pension exclusion amount for your filing status, you qualify to use the unclaimed portion 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
  • Your total income for the entire year was $150,000 or less; and
  • Your income from wages, net profits from business, distributive share of partnership income, and net pro rata share of S corporation income totals $3,000 or less.

When you and your spouse/civil union partner file a joint return and only one of you is 62 or older, you can exclude only the income of the qualified spouse/civil union partner.

Special Exclusion. This exclusion is for taxpayers who cannot receive Social Security or Railroad Retirement benefits. Since most taxpayers qualify for those benefits, few taxpayers are eligible to use the special exclusion. If you qualify, you can claim this benefit even if you used your maximum pension exclusion. You qualify 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) cannot receive Social Security or Railroad Retirement benefits, but you would have been eligible for benefits if you had fully participated in either program.
More Information

See Tax Topic Bulletin GIT-1 & 2 Retirement Income, for more information.

You qualify for the 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 (December 31 for calendar year filers); and
  • Your total income for the entire year was $100,000 or less.

If you qualify, you can claim the lesser of your actual taxable pension income or the maximum pension exclusion amount for your filing status (see chart below).

When you and your spouse/civil union partner file a joint return and only one of you is 62 or older or disabled, you can still claim the maximum pension exclusion. However, you can exclude only the pension, annuity, or IRA withdrawal of the qualified spouse/civil union partner.

Tax Year Married/CU Couple, Filing Joint Return Married/CU Partner, Filing Separate Return Single, or Head of Household, or Qualifying Widow(er)/Surviving CU Partner
2020 and after $100,000 $50,000 $75,000
2019 $80,000 $40,000 $60,000
2018 $60,000 $30,000 $45,000
2017 $40,000 $20,000 $30,000
2016 and other $20,000 $10,000 $15,000

*Chart reflects the scheduled increases in the Retirement Income Exclusion amount, occurring over a four-year period, beginning with Tax Year 2017.

You may be able to exclude other types of income (wages, interest, dividends, etc.) from your total income. There are two parts to these exclusions, and each part has different eligibility requirements:

Unclaimed Pension Exclusion. If you did not use the maximum pension exclusion amount for your filing status, you qualify to use the unclaimed portion 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
  • Your total income for the entire year was $100,000 or less; and
  • Your income from wages, net profits from business, distributive share of partnership income, and net pro rata share of S corporation income totals $3,000 or less.

When you and your spouse/civil union partner file a joint return and only one of you is 62 or older, you can exclude only the income of the qualified spouse/civil union partner.

Special Exclusion. This exclusion is for taxpayers who cannot receive Social Security or Railroad Retirement benefits. Since most taxpayers qualify for those benefits, few taxpayers are eligible to use the special exclusion. If you qualify, you can claim this benefit even if you used your maximum pension exclusion. You qualify 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) cannot receive Social Security or Railroad Retirement benefits, but you would have been eligible for benefits if you had fully participated in either program.
More Information

See Tax Topic Bulletin GIT-1 & 2 Retirement Income, for more information.


Last Updated: Tuesday, 08/31/21