February 15,2017
the staff of the Ridgewood blog
Ridgewood Nj, according to Kiplinger’s exclusive 2016 analysis of state taxes 10 states impose the highest taxes on retirees. Three of them treat Social Security benefits just like Uncle Sam does—taxing as much as 85% of your benefits. Exemptions for other types of retirement income are limited or nonexistent. Property taxes are on the high side, too. And if that weren’t bad enough, some of these states are facing significant financial problems that could force them to raise taxes, cut services, or both.
New Jersey placed 8 on the list Tax-UnFriendly States for Retirees 2016
State Income Tax: 1.4% (on as much as $20,000 of taxable income) – 8.97% (on taxable income greater than $500,000)
Average State and Local Sales Tax: 6.97%
Estate Tax/Inheritance Tax: Yes/Yes
The Garden State’s tax policies create a thicket of thorns for some retirees.
Its property taxes are the highest in the U.S. The median property tax on the state’s median home value of $313,200 is $7,452.
While Social Security benefits, military pensions and some retirement income is excluded from state taxes, your other retirement income could be taxed as high as 8.97%. And New Jersey allows localities to impose their own income tax; the average local levy is 0.5%, according to the Tax Foundation.
Residents 62 or older may exclude as much as $15,000 ($20,000 if married filing jointly) of retirement income, including pensions, annuities and IRA withdrawals, if their gross income is $100,000 or less. Those amounts will gradually rise so that by 2020 joint filers can exclude up to $100,000; single filers, up to $75,000; and married filing separately, up to $50,000.
New Jersey is one of only a couple of states that impose an inheritance and an estate tax. (An estate tax is levied before the estate is distributed; an inheritance tax is paid by the beneficiaries.) In general, close relatives are excluded from the inheritance tax; others face tax rates ranging from 11% to 16% on inheritances of $500 or more. Estates valued at more than $675,000 are subject to estate taxes of up to 16%. Assets that go to a spouse or civil union partner are exempt. The threshold will rise to $2 million on Jan. 1, 2017 and the estate tax will disappear completely in 2018.
To make matters worse George Mason University’s Mercatus Center ranks New Jersey 48th in its analysis of states’ fiscal health.
