Q. My spouse and I are each older than 65 and we every obtain a federal civil service pension. My pension is larger than the $100,000 cutoff for the pension exclusion. My spouse’s pension is $40,000 so we plan to file individually this yr. How is our curiosity revenue divided between our two returns? We’ve got some Certificates of Deposit (CDs) in every of our names and a few are joint. We even have financial savings bonds in her identify however I really purchased them. What will we do?
— Married taxpayer
A. This can be a widespread query for individuals who wish to change their submitting standing.
For starters, New Jersey tax regulation says it’s essential to use the identical submitting standing in your New Jersey tax return as you do for federal functions.
“If you wish to file individually for New Jersey, it’s essential to additionally file individually for the IRS,” mentioned Bernie Kiely, a licensed monetary planner and authorized public accountant with Kiely Capital Administration in Morristown. “The advantage of filing separately for the state is perhaps negatively offset by larger federal taxes.”
For 2019, these married submitting collectively can exclude $80,000 of revenue, married taxpayers who file individually can exclude $40,000 of revenue, and singles can exclude $60,000.
For the 2020 tax yr, in case you are married and submitting collectively, you may exclude $100,000 of revenue, these married filing separately can exclude $50,000 and singles can exclude $75,000 of revenue.
You will need to even be 62 or older, or due to a incapacity, you should be receiving Social Safety advantages, to qualify.
As you mentioned, you gained’t qualify for the exclusion in case your revenue is more than $100,000.
“If you’re over by as little as one greenback, your exclusion isn’t phased out, it’s merely gone,” Kiely mentioned. “Additionally bear in mind your Social Safety revenue isn’t counted as a result of New Jersey doesn’t tax Social Security.”
About curiosity and dividends, you’re speaking about three sorts of accounts: yours, hers and yours collectively.
“Kiely mentioned financial institution accounts, CDs and brokerage accounts in your identify alone belong to you for tax functions. Similar for those in your spouse’s identify — they belong to her for tax functions.
“The joint accounts belong to each of you equally, so joint account revenue ought to be break up equally,” he mentioned. “These guidelines apply to each your federal tax returns in addition to your state return.”
E-mail your inquiries to [email protected].
Karin Worth Mueller writes the Bamboozled column for NJ Advance Media and is the founding father of NJMoneyHelp.com. Comply with NJMoneyHelp on Twitter @NJMoneyHelp. Discover NJMoneyHelp on Facebook. Join NJMoneyHelp.com’s weekly e-newsletter.