As financial advisors in Morris County, NJ, we see many financial benefits to living and/or retiring in New Jersey from a financial perspective…it’s not only about the Taylor Ham and Palisades Park. We offer these five tips for anyone who is (thinking about) or is retiring in Morristown, NJ.
Before we get started, if you’re a New Jersey resident (or thinking about moving to or retiring in New Jersey), take a moment to check out our other blogs:
A checklist for moving to Morristown, NJ from NYC
What is the average income in New Jersey? [2022 update]
40 questions to ask a financial advisor in New Jersey
Click here to sign up for our newsletter!
#1 You may get special tax treatment
Is Morristown, NJ a good place to live?
Yes!
But it sure can get expensive.
That’s why we find it refreshing that income from IRAs, Keough plans, SEPs, 401(k) plans, and others would be excluded from taxation for New Jersey residents earning under $100,000. Those earning between $100,000 and $150,000 would get a partial tax exclusion.
If you are looking to retire in New Jersey and would like to learn more, please refer to this article on the recent New Jersey tax break.
#2 There may be property tax rebates for older New Jerseyans
New Jersey seniors older than 65 and earning less than $150,00 a year, through the Homestead Benefit program, may be eligible for property tax rebates. This also applies to those who have low income or are disabled. This benefit was recently increased.
This is welcome relief, as New Jersey is one of the states most reliant on property tax for funding. New Jersey ranks as one of the more expensive states in terms of property taxes; with an effective 2.49% rate, the property tax on a $217,500 home would be $5,419, according to US News and World Report.
#3 Enjoy the tax free bond interest!
Income from NJ municipal bonds is treated as free from federal income tax for New Jersey residents. This is great news for New Jerseyans who invest in bonds that fund local community projects. These bonds are issued by New Jersey state and local government, typically. But other entities such as public financing authorities may issue them as well.
As with any investment, all factors should be taken into account, such as how well the investment fits with your overall risk tolerance, the viability of the investment itself, and other factors. With bonds, you are also going to need to look at the bond’s duration, or sensitivity to interest rate changes.
Investors often see a bond as a bond, but there’s a deeper dimension for NJ residents. This is not something many people are diligent about. Be sure to check if your bond fund – mutual fund, ETF, or other commingled bond vehicle – has any national (non New Jersey) bonds in it. If so, you may be hit with tax just for holding those non-NJ municipal bonds.
Not all municipal bonds were created equal!
#4 NJ does not have inheritance tax if gift stays within the family
The state of New Jersey will waive inheritance tax if you are gifting assets to another person in your family. According to Nolo.com, the recipient must be a “Class A beneficiary” to receive full exemption, which includes:
- Spouses
- Domestic partners
- Parents
- Children
- Stepchildren
- Grandchildren
Other types of beneficiaries may be eligible for a partial redemption. This is especially useful for those retiring in New Jersey as you may be gifting as part of your estate plan, and special tax treatment is an added sweetener!
#5 NJ does not have estate tax if gifted to close family member
Before we discuss the topic of estate tax and New Jersey, let’s take a moment to clarify some concepts.
Estate taxes are different from inheritance taxes (which were discussed in #4). The former is removed from the estate when the decedent passes and the assets are transferred, while the latter is paid by the beneficiary.
An estate tax is applied to inheritances of certain fair market value. However, New Jersey no longer has an estate tax. It was canceled for anyone who dies after 2018. This is beneficial for people thinking about retirement in Morristown, NJ or anywhere else in New Jersey.
Concluding thoughts on retiring in Morristown, NJ
We are fans of Bruce Willis, Queen Latifah, Frank Sinatra, and Buzz Aldrin. But that’s not the only reason why we feel that Morristown, NJ is a great place to retire as it is offer a wonderful mix of business, history and family life.
We are fortunate to know many of the good people that make Morristown special. This is a special community and we are privileged to serve it! For more information about how we help the local community as financial advisors in Morristown, New Jersey, please contact us.
Sources
Bakan, Josh. (2021, July 8th). Patch.com. Retiree Tax Break Expansion Signed Into NJ Law. What It Means. https://patch.com/new-jersey/parsippany/retiree-tax-break-expansion-signed-nj-law-what-it-means
Barchenger, Stacey. (2021, June 21st). NorthJersey.com. NJ property tax aid: Lawmakers, Gov. Murphy agree to expand Homestead credit in budget. https://www.northjersey.com/story/news/2021/06/21/nj-property-tax-budget-homestead-credit/7762186002/
Hubbard, Kaia. (2021, Feb 23rd). US News and World Report. States With the Highest Property Taxes. https://www.usnews.com/news/best-states/articles/2021-02-23/these-states-have-the-highest-property-taxes
Mueller, Karen Price. (2021, June 23rd). NJ.com. N.J. retirees with income up to $150K will get new tax break under the budget deal. https://www.nj.com/politics/2021/06/nj-retirees-with-income-up-to-150k-will-get-new-tax-break-under-the-budget-deal.html
Randolph, Mary, J.D. Nolo.com. New Jersey Inheritance Tax. https://www.nolo.com/legal-encyclopedia/new-jersey-inheritance-tax.html