Hi.
I will live off investments and IRAs at age 62. How will NJ tax me?
I do not have any pension. Also, can I pay taxes on April 15, or have to pay EST taxes as I withdraw money?
Thank you.
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"IRA distributions are not taxed by NJ."
This is incorrect. IRA distributions are taxable income.
But, the NJ Retirement Income Exclusion could result in a reduction in your tax, as long as your total NJ taxable income is below the threshold of $100,000.
Also,
You have a basis in your IRA as far as NJ is concerned because you did not deduct IRA contributions from your NJ taxable income in all those past years.
Those are unrecovered.
See Worksheet C in the NJ Resident Return Instructions for how to avoid double taxation on that money (i.e. recover it) when you withdraw from your IRA.There is a first year calculation, and then a calculation for all subsequent years. OR use TurboTax to do it, it is the same thing but in a different presentation.
You will need good records showing what you put in over the years, or some way to reconstruct that information.
However, if the Retirement Exclusion eliminates your tax, the unrecovered calculation becomes moot.
IRA distributions are not taxed by NJ.
To avoid an underpayment penalty, you should make estimated tax payments for the current tax year if both of the following apply:
- 1. You expect to owe at least $1,000 in tax for the current tax year, after subtracting your withholding and credits.
- 2. You expect your withholding and credits to be less than the smaller of: 90% of the tax to be shown on your current year’s tax return, or 100% of the tax shown on your prior year’s tax return. (Your prior year tax return must cover all 12 months.)
TurboTax (TT) can prepare the payment vouchers. In your 2016 software, enter at:
Federal Taxes or Personal
Other Tax Situations
Other Tax Forms
Form W-4 and Estimated Taxes - Click the Start or Update button
If your goal is just to avoid the underpayment penalty, then paying 100% of the prior year tax liability is the “safe haven”
Thanks Critter. I wanted to be SURE that NJ will not tax my IRA withdrawals.
I was hoping to just do taxes yearly, and not EST payments 4 times a year.
Since I have investments in my "taxable" accounts, looks like I will have to do the EST payments on the interest and dividends.
"IRA distributions are not taxed by NJ."
This is incorrect. IRA distributions are taxable income.
But, the NJ Retirement Income Exclusion could result in a reduction in your tax, as long as your total NJ taxable income is below the threshold of $100,000.
Also,
You have a basis in your IRA as far as NJ is concerned because you did not deduct IRA contributions from your NJ taxable income in all those past years.
Those are unrecovered.
See Worksheet C in the NJ Resident Return Instructions for how to avoid double taxation on that money (i.e. recover it) when you withdraw from your IRA.There is a first year calculation, and then a calculation for all subsequent years. OR use TurboTax to do it, it is the same thing but in a different presentation.
You will need good records showing what you put in over the years, or some way to reconstruct that information.
However, if the Retirement Exclusion eliminates your tax, the unrecovered calculation becomes moot.
Wow, Thank You Fan Fare!
My income threshold will be below $100,000 but I thought that threshold only applied to NJ Pension holders.
I am a single person and have no pension, though I have made contributions to my IRA for many years. I have records of all those contributions EXCEPT prior to my divorce in 2005.
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