Removes income-based limitations on gross income tax exclusion for pension and retirement income.

A1611

ASSEMBLY, No. 1611

STATE OF NEW JERSEY

222nd LEGISLATURE

�

PRE-FILED FOR INTRODUCTION IN THE 2026 SESSION

Sponsored by:

Assemblyman SEAN T. KEAN

District 30 (Monmouth and Ocean)

Co-Sponsored by:

Assemblywoman Fantasia

SYNOPSIS

���� Removes income-based limitations on gross income tax
exclusion for pension and retirement income.

CURRENT VERSION OF TEXT

���� Introduced Pending Technical Review by Legislative
Counsel.

��

An Act

removing income-based limitations on the
gross income tax exclusion for pension and retirement income, amending
N.J.S.54A:6-10
and
P.L.
1977, c.273.

����
Be It
Enacted
by the Senate and General Assembly of
the State of New Jersey:

���� 1.��� N.J.S.54A:6-10 is
amended to read as follows:

���� 54A:6-10.� Pensions and
annuities.

���� a.���� Gross income shall not
include that part of any amount received as an annuity under an annuity,
endowment, or life insurance contract which bears the same ratio to such amount
as the investment in the contract as of the annuity starting date bears to the
expected return under the contract as of such date.� Where (1) part of the
consideration for an annuity, endowment, or life insurance contract is
contributed by the employer, and (2) during the three-year period beginning on
the date on which an amount is first received under the contract as an annuity,
the aggregate amount receivable by the employee under the terms of the contract
is equal to or greater than the consideration for the contract contributed by
the employee, then all amounts received as an annuity under the contract shall
be excluded from gross income until there has been so excluded an amount equal
to the consideration for the contract contributed by the employee.

���� b.� (1)� In addition to that
part of any amount received as an annuity which is excludable from gross income
as herein provided, gross income shall not include payments:

���� for taxable years beginning
before January 1, 2000, of up to $10,000 for a married couple filing jointly,
$5,000 for a married person filing separately, or $7,500 for an individual
filing as a single taxpayer or an individual determining tax pursuant to subsection
a. of N.J.S.54A:2-1;

���� for the taxable year beginning
on or after January 1, 2000, but before January 1, 2001, of up to $12,500 for a
married couple filing jointly, $6,250 for a married person filing separately,
or $9,375 for an individual filing as a single taxpayer or an individual
determining tax pursuant to subsection a. of N.J.S.54A:2-1;

���� for the taxable year beginning
on or after January 1, 2001, but before January 1, 2002, of up to $15,000 for a
married couple filing jointly, $7,500 for a married person filing separately,
or $11,250 for an individual filing as a single taxpayer or an individual
determining tax pursuant to subsection a. of N.J.S.54A:2-1;

���� for the taxable year beginning
on or after January 1, 2002, but before January 1, 2003, of up to $17,500 for a
married couple filing jointly, $8,750 for a married person filing separately,
or $13,125 for

an individual filing as a single
taxpayer or an individual determining tax pursuant to subsection a. of
N.J.S.54A:2-1;

���� for taxable years beginning on
or after January 1, 2003, but before January 1, 2017 of up to $20,000 for a
married couple filing jointly, $10,000 for a married person filing separately,
or $15,000 for an individual filing as a single taxpayer or an individual
determining tax pursuant to subsection a. of N.J.S.54A:2-1;

���� for taxable years beginning on
or after January 1, 2017, but before January 1, 2018, of up to $40,000 for a
married couple filing jointly, $20,000 for a married person filing separately,
or $30,000 for an individual filing as a single taxpayer or an individual
determining tax pursuant to subsection a. of N.J.S.54A:2-1;

���� for taxable years beginning on
or after January 1, 2018, but before January 1, 2019, of up to $60,000 for a
married couple filing jointly, $30,000 for a married person filing separately,
or $45,000 for an individual filing as a single taxpayer or an individual
determining tax pursuant to subsection a. of N.J.S.54A:2-1;

���� for taxable years beginning on
or after January 1, 2019, but before January 1, 2020, of up to $80,000 for a
married couple filing jointly, $40,000 for a married person filing separately,
or $60,000 for an individual filing as a single taxpayer or an individual
determining tax pursuant to subsection a. of N.J.S.54A:2-1;����

���� for taxable years beginning on
or after January 1, 2020, of up to $100,000 for a married couple filing
jointly, $50,000 for a married person filing separately, or $75,000 for an
individual filing as a single taxpayer or an individual determining tax pursuant
to subsection a. of N.J.S.54A:2-1;

���� for taxable years beginning on
or after January 1, 2021,
but before January 1, 2022
, for a taxpayer
with gross income in excess of $100,000, but not more than $125,000, 50 percent
of payments for a married couple filing jointly, 25 percent of payments for a
married couple filing separately, or 37.5 percent of payments for an individual
filing as a single taxpayer or individual determining tax pursuant to
subsection a. of N.J.S.54A:2-1;

���� for taxable years beginning on
or after January 1, 2021,
but before January 1, 2022,
for a taxpayer
with gross income in excess of $125,000, but not more than $150,000, 25 percent
of payments for a married couple filing jointly, 12.5 percent of payments for a
married couple filing separately, or 18.75 percent of payments for an individual
filing as a single taxpayer or individual determining tax pursuant to
subsection a. of N.J.S.54A:2-1,

���� which are received as an
annuity, endowment or life insurance contract, or payments of any such amounts
which are received as pension, disability, or retirement benefits, under any
public or private plan, whether the consideration therefor is contributed by
the employee or employer or both, by any person who is 62 years of age or older
or who, by virtue of disability, is or would be eligible to receive payments
under the federal Social Security Act.

���� (2)� For taxable years
beginning on or after January 1, 2005, but before January 1, 2021, the
exclusion provided by this subsection shall only be allowed if the taxpayer has
gross income for the taxable year of not more than $100,000.

���� For taxable years beginning on
or after January 1, 2021,
but before January 1, 2022,
the exclusion
provided by this subsection shall only be allowed if the taxpayer has gross
income for the taxable year of not more than $150,000.

���� c.���� Gross income shall not
include any amount received under any public or private plan by reason of a
permanent and total disability.

���� d.��� Gross income shall not
include distributions from an employees' trust described in section 401(a) of
the Internal Revenue Code of 1986, as amended (hereinafter referred to as
"the Code"), which is exempt from tax under section 501(a) of the Code
if the distribution, except the portion representing the employees'
contributions, is rolled over in accordance with section 402(a)(5) or section
403(a)(4) of the Code.� The distribution shall be paid in one or more
installments which constitute a lump-sum distribution within the meaning of
section 402(e)(4)(A) (determined without reference to subsection (e)(4)(B)), or
be on account of a termination of a plan of which the trust is a part or, in
the case of a profit-sharing or stock bonus plan, a complete discontinuance of
contributions under such plan.

(cf: P.L.2021, c.129, s.1)

���� 2.��� Section 3 of P.L.1977, c.273
(C.54A:6-15) is amended to read as follows:

���� 3.��� Other retirement income.
a. (1) Gross income shall not include income:

���� for taxable years beginning
before January 1, 2000, of up to $10,000 for a married couple filing jointly,
$5,000 for a married person filing separately, or $7,500 for an individual
filing as a single taxpayer or an individual determining tax pursuant to subsection
a. of N.J.S.54A:2-1;

���� for the taxable year beginning
on or after January 1, 2000, but before January 1, 2001, of up to $12,500 for a
married couple filing jointly, $6,250 for a married person filing separately,
or $9,375 for an individual filing as a single taxpayer or an individual
determining tax pursuant to subsection a. of N.J.S.54A:2-1;

���� for the taxable year beginning
on or after January 1, 2001, but before January 1, 2002, of up to $15,000 for a
married couple filing jointly, $7,500 for a married person filing separately,
or $11,250 for an individual filing as a single taxpayer or an individual
determining tax pursuant to subsection a. of N.J.S.54A:2-1;

���� for the taxable year beginning
on or after January 1, 2002, but before January 1, 2003, of up to $17,500 for a
married couple filing jointly, $8,750 for a married person filing separately,
or $13,125 for an individual filing as a single taxpayer or an individual
determining tax pursuant to subsection a. of N.J.S.54A:2-1;

���� for taxable years beginning on
or after January 1, 2003, but before January 1, 2017, gross income shall not
include income of up to $20,000 for a married couple filing jointly, $10,000
for a married person filing separately, or $15,000 for an individual filing as
a single taxpayer or an individual determining tax pursuant to subsection a. of
N.J.S.54A:2-1;

���� for taxable years beginning on
or after January 1, 2017 but before January 1, 2018, gross income shall not
include income of up to $40,000 for a married couple filing jointly, $20,000
for a married person filing separately, or $30,000 for an individual filing as
a single taxpayer or an individual determining tax pursuant to subsection a. of
N.J.S.54A:2-1;

���� for taxable years beginning on
or after January 1, 2018, but before January 1, 2019, gross income shall not
include income of up to $60,000 for a married couple filing jointly, $30,000
for a married person filing separately, or $45,000 for an individual filing as
a single taxpayer or an individual determining tax pursuant to subsection a. of
N.J.S.54A:2-1;

���� for taxable years beginning on
or after January 1, 2019, but before January 1, 2020, gross income shall not
include income of up to $80,000 for a married couple filing jointly, $40,000
for a married person filing separately, or $60,000 for an individual filing as
a single taxpayer or an individual determining tax pursuant to subsection a. of
N.J.S.54A:2-1;

���� for taxable years beginning on
or after January 1, 2020, gross income shall not include income of up to
$100,000 for a married couple filing jointly, $50,000 for a married person
filing separately, or $75,000 for an individual filing as a single taxpayer or
an individual determining tax pursuant to subsection a. of N.J.S.54A:2-1;

���� for taxable years beginning on
or after January 1, 2021,
but before January 1, 2022,
for a taxpayer
with gross income in excess of $100,000, but not more than $125,000, 50 percent
of income for a married couple filing jointly, 25 percent of income for a
married couple filing separately, or 37.5 percent of income for an individual
filing as a single taxpayer or individual determining tax pursuant to
subsection a. of N.J.S.54A:2-1;

���� for taxable years beginning on
or after January 1, 2021,
but before January 1, 2022,
for a taxpayer
with income in excess of $125,000, but not more than $150,000, 25 percent of
gross income for a married couple filing jointly, 12.5 percent of income for a
married couple filing separately, or 18.75 percent of income for an individual
filing as a single taxpayer or individual determining tax pursuant to
subsection a. of N.J.S.54A:2-1,

���� when received in any tax year
by a person aged 62 years or older who received no income in excess of $3,000
from one or more of the sources enumerated in subsections a., b., k. and p. of
N.J.S.54A:5-1.

���� (2)� For taxable years
beginning on or after January 1, 2005, but before January 1, 2021, the
exclusion provided by this subsection shall only be allowed if the taxpayer has
gross income for the taxable year of not more than $100,000.

���� For taxable years beginning on
or after January 1, 2021,
but before January 1, 2022,
the exclusion
provided by this subsection shall only be allowed if the taxpayer has gross
income for the taxable year of not more than $150,000.

���� (3)� The total exclusion under
this subsection and that allowable under N.J.S.54A:6-10 shall not exceed the
amounts of the exclusions set forth in this subsection.

���� b.��� In addition to the
exclusion provided under N.J.S.54A:6-10 and subsection a. of this section,
gross income shall not include income of up to $6,000 for a married couple
filing jointly or an individual determining tax pursuant to subsection a. of
N.J.S.54A:2-1, or $3,000 for a single person or a married person filing
separately, who is not covered under N.J.S.54A:6-2 or N.J.S.54A:6-3, but who
would be eligible in any year to receive payments under either section if he or
she were covered thereby.

(cf: P.L.2021, c.129, s.2)

���� 3.��� This act shall take
effect immediately.

STATEMENT

���� This bill removes the
income-based limitations on the gross income tax exclusion for pension and
other retirement income.

���� Under current law, taxpayers
with $150,000 or less in annual income and who are at least 62 years old or
disabled may exclude certain pension and retirement income from taxable gross
income. For those with between $100,000 and $150,000 of income, the exclusion
is reduced. This bill eliminates the $150,000 income cap and the reduced
exclusion for those with between $100,000 and $150,000 so that taxpayers of any
income level, who are otherwise eligible, may claim the exclusion.

���� The purpose of this bill is to
allow taxpayers with pension and retirement income to exclude more of their
income from taxable gross income. By removing the income-based limitations,
this bill allows greater numbers of taxpayers to benefit from the tax relief
provided by the exclusion.