State guide
Does New Jersey tax retirement income? IRAs, Roth conversions and Social Security (2026)
By Secure Retirement PlannerUpdated
If you retire in New Jersey at 62 or older, you and your spouse can exclude up to $100,000 of pension and IRA income. Social Security is not taxed at all. The exclusion can cover your Roth conversion too, if your total income as a couple is $100,000 or less. New Jersey only taxes the part of a conversion it hasn't already taxed.
The catch is a cliff, and it is the real worry here. At $100,001 of total income, a couple's exclusion drops to 50% of their pension and IRA income. It drops to 25% above $125,000, and to zero above $150,000. Your conversion counts toward total income, so one extra dollar can cost you thousands in New Jersey tax.
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The short version
- New Jersey never let you deduct your IRA contributions, so those dollars come out of your conversion tax-free for New Jersey.
- Your earnings, and money you rolled in from a 401(k), are taxable for New Jersey when you convert.
- At 62 or older, your pension exclusion covers taxable pension, annuity and IRA income, including conversions.
- Your exclusion falls off a cliff at $100,000, $125,000 and $150,000 of total income, and your conversion counts toward those tests.
- New Jersey doesn't tax your Social Security, and your qualified Roth withdrawals stay off the New Jersey return.
Does New Jersey tax retirement income?
Partly. New Jersey does not tax your Social Security. At 62 or older, its pension exclusion covers pensions, annuities, IRA withdrawals and Roth conversions. But the exclusion shrinks once your total income passes $100,000, and it is gone above $150,000.
| Income type | Taxed by New Jersey in 2026? | Notes |
|---|---|---|
| Social Security | No | Doesn't count toward total income |
| Public pensions | Yes, after the exclusion | A couple 62 or older with total income of $100,000 or less can exclude up to $100,000 |
| Private pensions | Yes, after the exclusion | Same exclusion and income tests |
| IRA and 401(k) withdrawals | Yes, after the exclusion | IRA contributions NJ already taxed come out tax-free |
| Roth conversions | Yes, the part NJ hasn't taxed | Can use the exclusion at 62 or older. Counts toward the $100,000 and $150,000 tests |
Does New Jersey tax a Roth conversion?
Yes, in part. When you convert a traditional IRA to a Roth IRA, you include as income any amount that would be taxable if you withdrew it. The state's tax guidance says so.
That rule is in the GIT-1 & 2 bulletin (January 2026). The amount goes on line 20a of Form NJ-1040. What is taxable for New Jersey often differs from your federal number. New Jersey has never let you deduct IRA contributions. So your own contributions were already taxed by New Jersey and come out tax-free. Only your earnings, and money New Jersey never taxed, are taxable when you convert. You report the tax-free part on line 20b.
Money rolled into your IRA from a 401(k) is different. The state says amounts it never taxed, such as a 401(k) rollover, are taxable when you convert. If you made contributions before you moved to New Jersey, they are treated as if you lived there when you made them.
How does New Jersey's pension exclusion work with a conversion?
You qualify if two things are true. You (or your spouse, on a joint return) were 62 or older, or disabled under Social Security rules, on December 31. And your total income for the year was $150,000 or less. The exclusion covers taxable pensions, annuities and IRA withdrawals on line 20a. The taxable part of your conversion is reported there.
Total income is line 27 of the NJ-1040. It includes the taxable part of your conversion. It does not include the excludable line 20b part or your Social Security.
| Total income | Married filing jointly | Single, head of household, widow(er) | Married filing separately |
|---|---|---|---|
| $100,000 or less | Up to $100,000 | Up to $75,000 | Up to $50,000 |
| $100,001 to $125,000 | 50% of line 20a | 37.5% of line 20a | 25% of line 20a |
| $125,001 to $150,000 | 25% of line 20a | 18.75% of line 20a | 12.5% of line 20a |
| Over $150,000 | None | None | None |
Why the conversion size matters so much
Say you and your spouse have $70,000 of income, mostly a pension. You can convert $30,000 and owe no added New Jersey tax. Convert $1 more and your exclusion drops from $90,000 to about $45,000.
What are New Jersey's income tax rates?
New Jersey's rates run from 1.4% to 10.75%. These are the joint rates in the 2025 NJ-1040 instructions, the latest schedule out on Nov 9, 2026. We found no enacted change for 2026, but check the 2026 instructions when they come out.
| NJ taxable income over | But not over | Rate |
|---|---|---|
| $0 | $20,000 | 1.4% |
| $20,000 | $50,000 | 1.75% |
| $50,000 | $70,000 | 2.45% |
| $70,000 | $80,000 | 3.5% |
| $80,000 | $150,000 | 5.525% |
| $150,000 | $500,000 | 6.37% |
| $500,000 | $1,000,000 | 8.97% |
| $1,000,000 | and up | 10.75% |
What if I move out of New Jersey, and do I need estimated payments?
If you live in New Jersey for part of the year, you prorate your pension exclusion by the months you lived there. That applies if your total income for the whole year is $100,000 or less. Above $100,000, the exclusion isn't prorated.
Federal law (4 U.S.C. 114) bars states from taxing people who no longer live there on IRA and pension income. So a conversion you do after a real move is generally not New Jersey income. See Florida or Pennsylvania for how those states treat it.
Watch for a surprise interest charge. New Jersey charges installment interest if your tax after withholding is more than $400. It applies if you didn't pay at least 80% of it during the year. A large December conversion with no withholding can trigger it.
New Jersey doesn't tax your Social Security. Your qualified Roth withdrawals later are not reported on the New Jersey return at all.
What does the conversion cost federally?
Your federal tax uses the full taxable amount. It gives you no credit for contributions New Jersey already taxed. For 2026, couples pay 12% on taxable income up to $100,800 and 22% up to $211,400.
Your conversion can also raise your Medicare premiums two years later. See Roth conversions and IRMAA, and try your numbers in Roth conversion tax calculator.
Example: a Morris County couple and the $100,000 cliff
Bob and Carol are both 63 and file jointly. Bob has a $60,000 pension and they earn $10,000 of interest. Neither has started Social Security. Carol's IRA came from a 401(k) rollover, so every dollar is taxable to New Jersey when converted.
With no conversion, their total income is $70,000. Bob's pension is fully excluded, and their New Jersey tax is $112.
Converting $30,000 brings total income to exactly $100,000. The exclusion grows to $90,000, so their New Jersey tax stays $112. Converting $50,000 pushes them to $120,000, where the exclusion is only 50% of $110,000. Their New Jersey tax rises to about $1,124.
At $80,000 of conversion, total income is $150,000 and New Jersey tax is about $3,468. One more dollar and the exclusion is gone.
What this means for you: in New Jersey, know your total income to the dollar before you convert, and stop just under a cliff.
| Conversion | NJ total income | Pension exclusion | NJ tax | Federal tax added |
|---|---|---|---|---|
| $0 | $70,000 | $60,000 | $112 | |
| $30,000 | $100,000 | $90,000 | $112 | $3,600 |
| $30,001 | $100,001 | about $45,001 | about $879 | about $3,600 |
| $50,000 | $120,000 | $55,000 | about $1,124 | $6,000 |
| $80,000 | $150,000 | $35,000 | about $3,468 | $11,300 |
| $80,001 | $150,001 | $0 | about $5,402 | about $11,300 |
Hypothetical example. Assumes married filing jointly, both 63, no Social Security, an IRA with no New Jersey basis, the 2026 federal standard deduction ($32,200) and brackets (IRS Rev. Proc. 2025-32), and New Jersey's 2025 rate schedule and $1,000 personal exemptions. If your IRA holds contributions New Jersey already taxed, less of the conversion counts. It ignores Medicare IRMAA. Your numbers will differ.
Common questions
Does New Jersey tax Roth conversions?
Yes, the part that would be taxable if you withdrew it. Contributions New Jersey already taxed come out tax-free. At 62 or older, your pension exclusion can cover the rest if your total income is low enough.
Does a Roth conversion count toward New Jersey's $100,000 and $150,000 limits?
Yes. The taxable part of your conversion is in total income on line 27, and that is the figure used for the exclusion tests.
Why is my New Jersey taxable amount lower than my federal one?
New Jersey never let you deduct IRA contributions, so it already taxed them. Only your earnings and money New Jersey never taxed, such as a 401(k) rollover, are taxable when you convert.
What happens if my income is $150,001?
You lose the pension exclusion entirely. New Jersey taxes all of your taxable pension, IRA and conversion income.
Does New Jersey tax Social Security?
No. Your Social Security benefits are left out of New Jersey income and don't count toward total income.
If only one of us is 62, can we use the exclusion on a conversion?
Yes, but only on the pension and IRA income of the spouse who is 62 or older. Converting from that spouse's IRA keeps the exclusion available.
Are qualified Roth withdrawals taxed in New Jersey?
No. The state says not to report any part of a qualified Roth IRA payout on your New Jersey return.
Sources
Facts on this page were last checked on November 9, 2026.
- NJ Division of Taxation, GIT-1 & 2, Retirement Income (January 2026) · IRA basis, conversion and 401(k) rollover rules, pension exclusion tests, part-year proration. Read Nov 9, 2026.
- NJ Division of Taxation, Retirement Income Exclusions · Exclusion amounts and percentages by total income. Read Nov 9, 2026.
- NJ Division of Taxation, 2025 Form NJ-1040 instructions · Line 27 total income, line 28a chart, exemptions, rate schedules, $400 installment interest rule. Read Nov 9, 2026.
- 4 U.S.C. 114, limit on state taxation of retirement income · Nonresidents' IRA and pension income. Read Nov 9, 2026.
- IRS Rev. Proc. 2025-32 (2026 inflation adjustments) · 2026 federal brackets and standard deduction. Read Nov 9, 2026.
Who wrote this
This guide was written and fact-checked by the Secure Retirement Planner editorial team using IRS, CMS and Social Security sources listed above. We update guides when the law or yearly limits change. How we research.