Is there a way to reduce my NJ 2025 taxes in 2026 just a little?

[ProbablyMike]

Hello, after doing my taxes on Turbotax, I miss the higher 'Other Retirement Exclusions' (line 28 on form NJ-1040 page 2) by $222 dollars, which makes my taxes $1442 higher. Last year I withdrew a large sum from my inherited IRA to catch up from years of not taking RMDs, and that along with interest and dividends put my total income at 125,222. Per the scale, up to 125K the deduction is 37.5% of the total, and at 125,001+ the deduction is 18.75% of the total. I went over 125K by just $222 dollars. I was hoping I could open an IRA for a small amount but NJ does not reduce income by an IRA contribution. I figure there isn't a way to lower it but thought I would ask. Last year you guys helped me a TON with the catch up on the RMDs without penalties, that I missed for a bunch of years.

[DianeW777]

It seems unlikely due to the fact you are already taking your required minimum distributions (RMDs) which means you would not be able to reduce the amount in 2026, for that income. The only other option, which may not be is to reduce other types of your income if you can.

• Income Tax on Withdrawals: If you are a New Jersey resident, withdrawals from an inherited traditional IRA are subject to state income tax, even if the decedent lived in another state.

If you are unable to reduce your other income sources then it's possible you may end up in a similar situation next year. Once key piece is to be sure you are paying enough tax throughout the year to eliminate interest and penalty. This can be done through withholding or estimated tax payment.

[fanfare]

Did you pay NJ Inheritance Tax?

You can subtract a portion of that from the distributions until it is used up.

Did the IRA owner have NJ basis?

If a New Jersey resident, the answer is  likely yes.

You can deduct that prorated using NJ Worksheet C.

In either case you calculate from your own records, which are produced only if you are audited  by NJ.

Keep copies  of worksheets in your tax record cabinet.

@ProbablyMike 

[ProbablyMike]

I didn't pay an inheritance tax, but I can explore to try and find out what his NJ basis may have been. Thanks. I had to calculate and take out 16 years of RMDs in a single year last year, and got excused by the IRS for the penalty. This year the RMD will be a lot lower.